Discuss to what extent the existence of corporate and personal taxes Essay - 1

Discuss to what extent the existence of corpo respect and personal taxes could affect companies dividend policy and capital letter anatomical structure decisions - Es suppose ExampleDividends could be said to be the reward for the shareholders participation in contributions towards the corpus of accompany and its management. The dividend policy plays a crucial role in the financial operations of corporate in the UK because it is most dependent on current profits and also future profitability of the entity. As per law, Companies could distribute dividends, merely out of dough or reserves of the Company, since otherwise it would amount to paying back its own capital to the shareholders. Thus, a Company could only distribute dividends out of its accumulated profits and free reserves usable for much(prenominal) distributionIt may choose not to pay any dividend and may retain its earnings for future plans, the Companys decision not to pay dividends may stem from the wish for main taining reserves for market expansions, need to buy back shares at later date, building funds for heavy investments projects, programmes, etc.It may find to pay minimum dividends out of its retained earnings, keeping the long term prospects of the Company in view, with the approving view that in future years, it would be able to maintain or increase, the level of profitability, and thus its rate of dividend. This is because a falling rate of dividend may discourage potential investors and they may become circumspect slightly investing in such companies. This would have detrimental consequences on the companys market image. The Companys operations are such that it is in a strong position to regularly pay high rates of dividends, even every quarter basis, in terms of a strong market position and market realisations. Moreover, because of reputation and goodwill gained by the Company, it is also able to attract outside investors for future growth plans and expansion, and it need not depend wholly on the present earnings and Capital reserves at its disposal. It would not be wrong to say that dividend policies, besides the tax element, is also dependent upon available of consistent profits and dividend yielding assets Role of tax in determination of dividend policiesTaxation plays an important role in the determination of dividends because of the following reasons Incidence of doubled receipts, especially in developed countries.Capital gains being subject to a lower rate of taxation than