When The Australian Financial Review devotes all of page four, The Australian runs it off the front page and Fran Kelly gives it 10 minutes on Radio National, then surely Opposition Leader Tony Abbott knows he’s onto a loser with this unprecedented Greens-backed $5.5 billion paid parental leave scheme.

Slugging big, rich ASX-listed companies might have seemed smart three years ago, but targeting the millions of shareholders who own them is quite another thing. And that’s precisely what the Coalition’s shadow finance minister and campaign spokesman Mathias Cormann did yesterday when he confirmed the 1.5% levy on big companies would not count as a tax credit when franked dividends are paid out.

Ironically, it was the Greens that inadvertently stirred up the latest hornets’ nest when The Guardian yesterday pointed out the independent Parliamentary Budget Office had valued the franking credits decision at $1.6 billion a year. That’s because the Greens — which are backing the hugely generous PPL scheme despite Abbott putting them near last on how-to-vote cards across the country — had earlier asked the PBO to cost their own very similar scheme.

In hindsight, it is surprising the franked dividend debate did not emerge during the 2010 campaign.

The decision to not allow the 1.5% levy on companies that make gross profits of more than $5 million per year to claim the impost as a franking credit was the measure that allowed the Coalition to move from shadow treasurer Joe Hockey’s “50, 60 or 70% funded” comment to Neil Mitchell on 3AW on Monday morning to claims of full funding by yesterday.

Explaining Paul Keating’s dividend imputation reforms of 1987 is not straightforward, but the key point is that it was designed to avoid double taxation. If a company has paid tax at the 30% corporate rate then you get a tax credit and potentially a refund cheque, defending on your personal tax rate.

The federal government’s own Future Fund received $270 million worth of franking credit refunds in 2012-13. This would be cut once the PPL scheme started in 2015, even after you factor in the Coalition’s proposed cut in the corporate tax rate to 28%.

Ironically, self-managed super funds with their low 15% tax rate would be hit harder than your regular direct individual investor on the top 46.5% tax rate — the franking credit reduction reduces the SMSF tax refund by more than it increases the tax on the wealthy individual investor.

The real political dynamite in this decision is the discrimination against Australian-based investors, as opposed to foreign investors in foreign companies like Apple, Google and News Corp. Foreign companies own a majority of the Australian economy, which is why there are about 2000 unlisted companies affected by the levy and only 1000 that are listed.

When it comes to the $1.6 billion franking component, that will exclusively come from Australian-resident taxpayers who claim the franking credit.

The best example of a foreign company not valuing franking credits is London-based Rio Tinto, which has amassed almost $20 billion in undistributed franking credit because more than 80% of their shareholders are foreign based and can’t use them. This is why Rio Tinto shares trade up to 20% higher on the Australian market as compared to the UK.

The Commonwealth Bank has about 750,000 retail investors who are estimated to collectively own about 40% of the $115 billion company. The bank is paying a fully franked dividend of $2 a share on October 3, which will distribute a record $3.2 billion to its shareholder base.

The proposed 1.5% levy is one thing, but at least it hits all big companies operating in Australia similarly. Extending it to franking credits is a second hit, which concentrates the $1.6 billion impost exclusively on Australian-based taxpayers, treating them differently to foreign investors.

*Stephen Mayne is policy and engagement co-ordinator for the Australian Shareholders’ Association and wasn’t paid for this item