How does the conglomerate companies pay taxes?

[Gopinath]

I was just wondering how does the conglomerate companies pay taxes? Based on the earnings(accounting number) or cash flows? Is there a fundamental tax advantage with conglomerates have diverse businesses operations underneath? what is the efficient company structure in terms of building wealth/dodging taxes?

 

Gopi

[scorpioncapital]

- Usually companies have a different set of financial statements for tax reporting purposes. These statements are a hybrid between the cash-flow and earnings statements. However, even the government recognizes the non-cash nature of certain expenses such as depreciation.

 

- You can sometimes work backwards from the actual corporate tax paid and the posted marginal tax rates to deduce approximately what the company is claiming for net taxable income. This is actually a useful audit technique to see discrepancies between reported earnings and actual earnings.

 

- The only advantage I see with conglomerates with respect to tax is the ability to offset gains in one business with losses in another instead of having to wait for profits in the losing business to recover.

 

 

[prunes]

Large conglomerates can also more easily amortize the cost of a skilled tax group over the entire business (e.g. GE).