What is the advantage of buying back tax’s that you owe along with compensation for the cost of inflation with an additional percentage point added on.
The tax on the capital borrowed purchased by equity holders is collateral held for the debt borrowed. Don’t you think it would be more advantageous for the company to pay the debt leaving the collateral in place as a credit.
It cost a considerable amount of capital for the company to sell the tax owing on the debt should there be any sinergy built from the borrowing of the debt in the first place.
Let’s look at the what if all the capital borrowed went to compensate management. For every dollar paid in wages or bonuses thirty percent goes to paying the tax. Let’s say they didn’t pay there tax and instead it goes toward paying the debt. The tax collateral is left in place and now the debt is less due too tax money being directed towards the debt. In turn there would be a tax credit owing to investors. If this tax was owed to the bank and I turn owed to the government it would show up as treasury stock.
If a company pre pays the tax out of money borrowed it would be a tax credit that would allow the asset value of the company to be stated as a greater value then its liability or debt because part of the liability of the borrowed capital has been paid and is now held in trust to be sold by the transfer agent or officers in charge.
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