Corporate taxes and profit payments

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Corporate taxes and profit payments

The corporation may end up with a profit. The country can set tax levels for corporations and will receive part of the profit. The remaining amount can remain in the corporation but the owner may also decide to make the corporation pay part of the profit after tax to the owner.

Example: If the tax is at 30%, and the profit payments are at 60% it means that if profit was 100 M. 30 M will be paid as tax and 42 M (60% of the remaining 70 M) will be paid to the owner as profit participation. You are advised to leave part of the profit within the corporation and allow it to pay back loans. Loans require interest payments that reduce the profit of the corporation.

Corporate tax as set by the country president has many consequences. The net profit of corporations that is used for the computation of profit per share is based on the profit after tax and profit sharing (Or dividend) deductions.

Changes in the percentages of tax and profit sharing result in immediate changes in profitability, and have consequences for the share price.

Some presidents manipulated the tax percentages and influenced share prices while trading in the same shares for their own benefit. They know in advance what is about to happen to share prices and they trade with this knowledge.

Frequent changes in tax percentages have no function except for influencing of profits and market values. These changes are limited in size to prevent anyone from exploiting this feature.

The market value of the corporation depends on its profit after tax. The market value is important as it is part of the assets of the owner and assets are a measure of success and have an influence on the score of the country or enterprise.

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