<p>All else constant, a higher level of investments results in higher depreciation and re-valuations or &quot;write-downs&quot;, and these higher charges to revenue result in lower taxable profits and lower taxes.</p>
<p>A quote...</p>
<blockquote>
<p>I remember that you can only reinvest with money <strong>after</strong> paying a tax
on profits</p>
</blockquote>
<p>After an investment is made, depreciation is a periodic charge so it will affect the level of taxable profit (and taxes) in not only the current period but future periods.</p>

CC BY-SA 4.0
2023-09-26T07:49:31.790Z
Does an increase in investment affect depreciation or payable taxes in the *current* period?
Giskard
CC BY-SA 4.0
2023-09-26T13:15:06.917Z
@Giskard depreciation is affected in the period of a new investment or an increase in total investment, so yes.
H2ONaCl
CC BY-SA 4.0
2023-09-25T08:45:22.897Z
2023-09-26T04:31:02.267Z
2023-09-26T04:31:02.267Z
H2ONaCl
<p>There are successful companies that don't make profits, such as twitter, uber, amazon. My question is:</p>
<p><em>Can a company just reinvest lots of money to avoid making a profit and avoid paying tax?</em></p>
<p>From my economy 101 class I remember that you can only reinvest with money <strong>after</strong> paying a tax on profits.</p>
<p>What am I missing?</p>
<p>Reason for asking is that a company I was working for often refused to raise salaries on the ground of low profits while sales were great. Perhaps low profits was the result of a strategy instead of a sign of weakness.</p>

CC BY-SA 4.0
2023-09-26T10:06:50.293Z
It would be helpful to support your claim about twitter, uber, amazon with a reference - I'm not sure it's common knowledge.
Adam Bailey
CC BY-SA 4.0
2023-09-27T06:56:46.067Z
@AdamBailey If it is in wikipedia, or has a lot of hits on google with a simple search query, it may be considered common knowledge
Roland
<taxation><profits><accounting>
Does reinvestment of earnings decrease a corporation's tax
Roland
# Does reinvestment of earnings decrease a corporation's tax

(Asked by: username_0 on 2023-09-22)

There are successful companies that don't make profits, such as twitter, uber, amazon. My question is:

*Can a company just reinvest lots of money to avoid making a profit and avoid paying tax?*

From my economy 101 class I remember that you can only reinvest with money **after** paying a tax on profits.

What am I missing?

Reason for asking is that a company I was working for often refused to raise salaries on the ground of low profits while sales were great. Perhaps low profits was the result of a strategy instead of a sign of weakness.

**Tags:** taxation, profits, accounting

> **Comments:**
> **username_1**: It would be helpful to support your claim about twitter, uber, amazon with a reference - I'm not sure it's common knowledge.  
> **username_0**: @AdamBailey If it is in wikipedia, or has a lot of hits on google with a simple search query, it may be considered common knowledge  

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## 1 answers

### Answer by username_2 on 2023-09-25. Score: 0 | Accepted answer

All else constant, a higher level of investments results in higher depreciation and re-valuations or "write-downs", and these higher charges to revenue result in lower taxable profits and lower taxes.

A quote...

> I remember that you can only reinvest with money **after** paying a tax
> on profits

After an investment is made, depreciation is a periodic charge so it will affect the level of taxable profit (and taxes) in not only the current period but future periods.

> **Comments:**
> **username_3**: Does an increase in investment affect depreciation or payable taxes in the *current* period?  
> **username_2**: @username_3 depreciation is affected in the period of a new investment or an increase in total investment, so yes.  

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