A new clause in the proposed Finance Bill suggests treating loans taken by shareholders from public limited companies as dividends, subjecting them to taxation. This measure aims to combat tax evasion by company directors who take loans instead of distributing taxable dividends. Currently, shareholders of private limited companies face similar tax treatment for loans, and the new proposal extends this to public limited companies by removing the term “private.” Tax experts support this proposal, viewing it as a way to reduce tax avoidance and increase revenue. The stock market has around 400 listed companies, with over 300 paying dividends. Some industry leaders, however, argue that loans from public companies are unethical due to the potential for abuse and believe that regulatory authorities should closely monitor such practices. They also suggest that taxing these loans as dividends may not be the best approach.
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