Business Profitability Versus Tax Minimization

Abstract

Business owners are determined to pay less income tax, and while tax reduction is certainly a worthy goal for the business owner, the overall health of the company should be an even greater priority. Managers and owners must be careful to ensure that tax minimization efforts do not supersede the overarching economic goals of the company. Hyper-focusing on the tax implications of specific transactions, can distract managers, to the point that operational business decisions become subservient to potential tax deductions, rather than tax deductions being a by-product of solid operational business decisions. This skewed prioritization may cause companies to use a defensive planning strategy of tax minimization, rather than an offensive plan which targets rudimentary factors of earnings maximization and market expansion.