IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v16y2023i3p208-d1103925.html
   My bibliography  Save this article

Two Types of Payments of Tax on Profit: Advanced Payments and at the End of Periods: Consideration within BFO Theory with Variable Profit

Author

Listed:
  • Peter Brusov

    (Department of Mathematics, Financial University under the Government of Russian Federation, Moscow 125167, Russia)

  • Tatiana Filatova

    (Department of Financial and Investment Management, Financial University under the Government of Russian Federation, Moscow 125167, Russia)

  • Veniamin Kulik

    (Deutsche Bank Ltd., Moscow 117198, Russia)

Abstract

Two modifications of a modern theory of capital structure—the Brusov–Filatova–Orekhova (BFO) theory—with variable income are considered: (1) with the income tax payments at the end of periods and (2) with advance income tax payments. BFO formulas for the WACC, and for company capitalization, V, were derived for these two cases. Using the obtained formulas, the dependence of the weighted average cost of capital, WACC; the discount rate; WACC–g (here, g, is the growth rate); company value, V; and the equity cost, ke, on the leverage level, L, at different values of g, at different values of the debt capital cost, kd, and at different values of company age, n, were studied. Comparing the results for cases (1) and (2) shows that case (2) is always preferable for both the company and the regulator. Recommendations have been developed for both parties to expand the practice of advance income tax payments. The managerial implications are as follows. Companies may choose to pay income tax either in advance or at the end of the reporting period in accordance with current results and tax laws. The developed methodology makes it possible to study companies with growing profits and companies with falling profits, which is very important in practice. It also allows the study of companies for which profits could rise and fall in different periods.

Suggested Citation

  • Peter Brusov & Tatiana Filatova & Veniamin Kulik, 2023. "Two Types of Payments of Tax on Profit: Advanced Payments and at the End of Periods: Consideration within BFO Theory with Variable Profit," JRFM, MDPI, vol. 16(3), pages 1-20, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:208-:d:1103925
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/16/3/208/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/16/3/208/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Generalization of the Brusov–Filatova–Orekhova Theory for the Case of Variable Income," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 265-290, Springer.
    2. Justyna Franc-Dąbrowska & Magdalena Mądra-Sawicka & Anna Milewska, 2021. "Energy Sector Risk and Cost of Capital Assessment—Companies and Investors Perspective," Energies, MDPI, vol. 14(6), pages 1-20, March.
    3. Islam, Silvia Z. & Khandaker, Sarod, 2015. "Firm leverage decisions: Does industry matter?," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 94-107.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Influence of Method and Frequency of Profit Tax Payments on Company Financial Indicators," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 241-264, Springer.
    2. Theodosios Anastasios Perifanis, 2022. "The Macroeconomic Results of Diligent Resource Revenues Management: The Norwegian Case," Energies, MDPI, vol. 15(4), pages 1-14, February.
    3. Lee, Chi-Chuan & Lee, Chien-Chiang & Xiao, Shunyi, 2021. "Policy-related risk and corporate financing behavior: Evidence from China’s listed companies," Economic Modelling, Elsevier, vol. 94(C), pages 539-547.
    4. Abrapuspa Ghani Talattov & Nur Azura Sanusi & Suhal Kusairi & Abu Hassan Shaari, 2016. "The Role Of Corporate Zakat On Optimal Capital Structure Policy: Evidence From Malaysian Firms," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 1(2), pages 259-292, February.
    5. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Generalization of the Brusov–Filatova–Orekhova Theory for the Case of Variable Income," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 265-290, Springer.
    6. Li, Larry & Islam, Silvia Z., 2019. "Firm and industry specific determinants of capital structure: Evidence from the Australian market," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 425-437.
    7. Martina Tuschl & Tomislav Kurevija, 2023. "Revitalization Modelling of a Mature Oil Field with Bottom-Type Aquifer into Geothermal Resource—Reservoir Engineering and Techno-Economic Challenges," Energies, MDPI, vol. 16(18), pages 1-27, September.
    8. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "The Generalization of the Brusov–Filatova–Orekhova Theory for the Case of Payments of Tax on Profit with Arbitrary Frequency," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 217-239, Springer.
    9. Daniela Nicoleta Sahlian & Adriana Florina Popa & Ștefania Amalia Nicoară & Corina Graziella Bâtcă-Dumitru, 2023. "Examining the Causality between Integrated Reporting and Stock Market Capitalization. The Case of the European Renewable Energy Equipment and Services Industry," Energies, MDPI, vol. 16(3), pages 1-12, January.
    10. Claudia Diana Sabău-Popa & Luminița Rus & Dana Simona Gherai & Codruța Mare & Ioan Gheorghe Țara, 2021. "Study on Companies from the Energy Sector from the Perspective of Performance through the Operating Cash Flow," Energies, MDPI, vol. 14(12), pages 1-13, June.
    11. LUCUȚ CAPRAȘ Isabella & RUS Alexandra Ioana Daniela & ACHIM Monica Violeta, 2023. "The Impact of Corporate Governance on Intellectual Capital. Empirical Evidence from Romanian Companies," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.
    12. Peter Brusov & Tatiana Filatova & Natali Orekhova, 2023. "Benefits of Advance Payments of Tax on Profit: Consideration Within Brusov–Filatova–Orekhova (BFO) Theory," Springer Books, in: The Brusov–Filatova–Orekhova Theory of Capital Structure, chapter 0, pages 205-216, Springer.
    13. repec:idn:jimfjn:v:1:y:2016:i:2e:p:1-34 is not listed on IDEAS
    14. Hugo Algarvio, 2023. "The Economic Sustainability of Variable Renewable Energy Considering the Negotiation of Different Support Schemes," Sustainability, MDPI, vol. 15(5), pages 1-21, March.
    15. Ireneusz Górowski & Bartosz Kurek & Marek Szarucki, 2022. "The Impact of a New Accounting Standard on Assets, Liabilities and Leverage of Companies: Evidence from Energy Industry," Energies, MDPI, vol. 15(4), pages 1-15, February.
    16. Hansen, T.A., 2022. "Stranded assets and reduced profits: Analyzing the economic underpinnings of the fossil fuel industry's resistance to climate stabilization," Renewable and Sustainable Energy Reviews, Elsevier, vol. 158(C).
    17. Zbysław Dobrowolski & Grzegorz Drozdowski & Mirela Panait & Simona Andreea Apostu, 2022. "The Weighted Average Cost of Capital and Its Universality in Crisis Times: Evidence from the Energy Sector," Energies, MDPI, vol. 15(18), pages 1-15, September.
    18. Victor-Gallardo, Luis & Quirós-Tortós, Jairo, 2023. "Techno-economic comparison of centralized and distributed power generation to support large-scale transport electrification in Costa Rica," Transport Policy, Elsevier, vol. 131(C), pages 120-138.
    19. Elżbieta Izabela Szczepankiewicz & Windham Eugene Loopesko & Farid Ullah, 2022. "A Model of Risk Information Disclosures in Non-Financial Corporate Reports of Socially Responsible Energy Companies in Poland," Energies, MDPI, vol. 15(7), pages 1-34, April.
    20. Jorge Armando Bedoya-Cadavid & Ángela María Lanzas-Duque & Harold Salazar, 2023. "WACC for Electric Power Transmission System Operators: The Case of Colombia," Energies, MDPI, vol. 16(2), pages 1-13, January.
    21. Mateusz Trzeciak & Izabela Jonek-Kowalska, 2021. "Monitoring and Control in Program Management as Effectiveness Drivers in Polish Energy Sector. Diagnosis and Directions of Improvement," Energies, MDPI, vol. 14(15), pages 1-25, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:208-:d:1103925. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.