§ Mr. Bruce-Gardyneasked the Chancellor of the Exchequer what estimate he has made of the average net cover, after tax, for dividends paid on shares in public companies in 1964 and in 1967, respectively.
§ Mr. Harold LeverEstimates for all public companies are not available. The Board of Trade analyses covering some 2,000 quoted companies account for well over half the net profits of public companies and the following is taken from this source.
It is too early to give a reliable figure for 1967. The best official estimates of the average equity dividend cover available are 1.7 for 1964 and 1.4 for 1966. It is difficult to interpret the relationship of these two figures because of the change in the tax system introduced by the Finance Act, 1965. In particular, the figure for 1964 is not a measure of the extent to which gross dividends could be increased at the expense of profit retentions. Moreover, the dividend cover as calculated has been reduced by the substitution of investment grants for investment allowances, for certain capital expenditure after 16th January, 1966.
The "dividend cover" has been taken as the ratio of distributable income to gross equity dividend distribution, and the distributable income as the gross income after subtracting tax, commercial depreciation and gross prior charges. The tax subtracted for 1966 is Corporation Tax at 40 per cent. and for 1964 Profits Tax and Income Tax other than that falling on distributions.
The figures for the year 1964 relate to companies' accounting years ending between 6th April, 1964 and 5th April, 1965. The figures for 1966, which are similarly 152W defined, relate to accounts received by the Board of Trade up to 30th September, 1967.