Abstract:
Abstract: Corporate dividend policy is related with corporate tax liability. Tax
liability of companies may vary depending on the payment of dividend. Effective
corporate dividend policy can reduce corporate tax liability. Thus, effective
corporate dividend policy can help corporations maximize shareholders’ wealth by
reducing effective tax rate. Tax liability may increase or decrease depending on the
dividend payment of a company. The objective of this study includes justifying the
implications of Corporate Dividend Policy on Corporate Taxation in case of listed
pharmaceuticals companies in Bangladesh. In this study 6 listed pharmaceuticals
companies in Bangladesh have been included and it has been found that when those
companies paid dividend at prescribed level as per corporate tax law, they got tax
rebate on their regular tax rate. Thus, after deducting the tax rebate those companies
paid tax liability at reduced rate and this eventually lessened effective tax rate.
Companies may ensure payment of dividend in away, so that retained earnings can
be used for future investment opportunities as well as the tax burden becomes
logical. They should make balance between dividend policy and tax liability to
maximize the wealth of shareholders.
