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Tax planning and the company's financial goals

Author: XuHuiZuo From: www.yourpaper.net Posted: 2009-11-20 16:56:18 Read:
[Abstract] tax law and active use of tax leverage with all aspects of corporate financial management activities combine to reduce the tax burden, to seek the maximum economic benefit is the basic starting point for business finance. This article describes the connotation of the company's financial objectives, tax constraints under the direction of the company's financial goals.
[Words] tax planning financial targets tax debt

A company's general financial goals connotation prescriptive

(A) financial objectives reflect the nature of the principal characteristics of
Financial goals are economic organizations continue to promote the principal movement hopes to achieve the purpose of it affecting and constraining organizational survival and development of the economies of the overall goal of environmental constraints of society as a whole with its own value judgments.
The funds are divided into principal and funds. The principal is the currency advanced by various economic organizations for production and business activities. The value-added is the nature of the principal amount of features it contains two meanings: First, the principal purpose of investment is to add value. Second, is the principal value-added possibility. According to Marx's labor theory of value, the workers during production and business activities, not only to create new value in use, and the formation of a value. The value created by the laborers as social labor is the principal value-added sources. Financial management is the principal external manifestation - the financial activities in the interests of constraints - financial relationships within the organic composition of the the its behavior fully reflect the essential characteristics of the principal amount of movement that the pursuit of added value or the level of interest. This is the nature of the company's financial goals orientation and core.
(B) the company's financial goals connotation
Business financial management, the aim point directly to the improvement of profit levels and solvency. Different organizational forms and different specific connotations in different period of financial goals, but, regardless of the company drawn up in the form of what specific financial goals, and ultimately must meet the ultimate goal of the investment owner wealth maximization. Often have some differences in the actual operation of the company, operations management and investment expectations of the owners to achieve the objective: Investors in financial management strategy and business strategy tend to be from the point of view of the company long-term healthy development, and operators in order to often be satisfied the "safe handling business", the result is, inevitably lead to the investment owners may not be able to get due to the wealth that maximizes the expected pursuit of their own short-term interests. But things are contradictory unity, from a development point of view, both are: First, the unity of the investment owner's financial goals, and its long-term interests of the company operators must first pass through the pursuit of financial goals in order to is embodied; conservative, negative attitudes and behaviors of the Second, operators invested owners deemed "inappropriate" will endanger the interests of the managers. Thus, in the long run, business management prepared financial goals must be united in the objective requirements of the investment owner wealth maximization.

Second, the tax under the constraints of the company's financial goals

(A) tax debt and general corporate debt cash payment need differences
The company's liabilities are mainly derived from: (1) business debt, such as a variety of long-term and short-term loans, bonds payable, settlement credit debt and other long-term payables; (2) investment owner of the dividends, bonuses payable; (3) to be paid in accordance with the law the taxes, and so on. The first two definitions of the general debt of the company, which is called the tax debt.
Repayment of the debt tax debt with the company's general requirements for cash flow presents differences. General debt relative to the tax debt repayment with greater flexibility on the cash flow constraints, that reflects the "soft" constraints state. Tax debt settled embodies the "rigidity" of the cash flow constraints, basically there is no so-called flexibility possible. The seriousness of the tax laws and normative the company only full and timely fulfill its tax obligations, to make it the market legal persons eligible to be recognized in law, and thus may have the right to legal protection of the legal autonomy of the market with the proper operating income. Payment of statutory taxes, unlike the general debt of the company, its operation rules must spend real cash to be completed. (B) the cash-strapped negative effect on the vital interests of the target analysis
Measurement relying on the records at the statutory tax rate and the company carrying the taxable income (for ease of analysis, it is assumed that the of accounting taxable income and tax law tax income has the same connotation) Amount of tax income, regardless the carrying significance, actually The cash inflows condition. Thus company tax code of conduct is: taxable income to reflect the carrying amount (or accounting) concept, the company must be in accordance with the law in full and in a timely manner to spend real cash to be withheld and.
Since the existence of the expected accounting income accrued cash inflows and the actual amount of cash inflow peer with objectivity, based on the contradiction between the rigid constraints of accounting income rather than actual realized gains on the payable taxes paid in cash , simply based on the profitability of the company established the so-called "best financial goals in the vital interests of the company following the negative effects of the rigid constraints of tax cash expenditures.
First, the absolute Cash lack of ability to pay. Cash on hand balance is insufficient to pay immediate taxes prior to the expiration of the tax law can not be factoring.
Second, the relative lack of cash. Handheld cash shortage relative to taxable cash payment requirements, but the facility can make up, just have to pay a high price.
Relative to the objective of maximizing the interests of the owners of companies to invest, no matter what kind of case the tax cash flow shortage, are a direct reflection of the erosion of the fundamental interests of the company, the loss of that tax opportunity is completely defined as the cost of the company. Once the amount of such loss cost growth exceeds the carrying amount of the marginal after-tax profit, it means that the book profit at this time excessive, or that a certain amount of carrying profitability Reduction may be more beneficial to the company.
(C) Tax modest financial goals of the Company under the constraints connotation prescriptive. The the moderate financial goals based on the company's profitability and cash solvency checks and balances coordination
The book income maximization is not directly equivalent investment to maximize the owner's interests, the latter must fully rely on the solvency of cash, especially tax cash flow limits, follow the principle of marginal profit and loss analysis, profitability and cash pay ability to weigh the pros and cons with constraints coordination, and finally reach harmony and unity in both investment owners benefit the most maintenance. 2. Modest financial goals should be conducive to the long-term interests of the company and the state of benign solid growth
Higher book income is indeed conducive to the Government to immediately increase tax revenue, but due to the the Government immediate increase in income is based on company needs to withstand a greater chance of the risk of loss premise once the company paid in cash due to the tax burden relative pressure is too heavy put on company funds to run the internal order to alleviate serious disturbance occurs, resulting in effective basis for advancing reproductive vigor stagnated. Ultimately hurt not just the interests of the company but the main thing will be the national interest. On the contrary, if the Government can really through legal norms market value judgment orientation to empower the company as a corporate entity in the market, so that can fully rely on effective cash expected ability to pay, rather than book income to maximize organizational and operational financial decisions, such despite the possibility of a certain degree of government the instant tax revenue increase generated, but the tiny price in exchange for the company's long-term stable funding base laid, and thus see from the long-term significance, the government's tax revenue is bound with the company effective proliferation activity and improve the functions and strengthen greater growth.

References:
[1] Tang Tengxiang tax planning in China Financial and Economic Publishing House, 2006.
[2] Zhang Tao. Corporate revenue management. Shanghai University of Finance and Economics Press, 2004.
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