Most investors with shares will be subject to withholding tax at the standard rate of income tax of 24 per cent on dividends paid by publicly quoted companies from April 6th. The tax owed will be deducted automatically by the company, based on the gross dividend, and it will then be paid to the Revenue Commissioners. Shareholders liable to tax at the higher rate of 46 per cent will be required as before to declare their dividend income in their tax returns and to pay the balance due to the Exchequer.

Some elderly investors or those with other exemptions may be entitled to a tax refund, but could have a considerable wait before the funds are repaid. At the moment, accountants suggest those waiting for refunds could have to wait between 12 and 18 months for such a rebate.

Certain non-resident investors will also be liable to this witholding tax. Their status for tax purposes will be determined by the address given on the company's share register. It is expected that non-resident investors will be able to obtain a certificate which would be valid for up to five years and could be forwarded to the individual companies in which they hold shares.

The system will be introduced to coincide with the abolition of tax credits on dividends from April 6th, announced in last year's Budget. Mr McCreevy decided to abolish tax credits as shareholders will benefit from the phased lowering of corporation tax on profits to 12.5 per cent by 2003.