THE IMPACT OF CORPORATE INCOME TAXATION ON FINANCIAL RESULTS IN RUSSIA

ABSTRACT

The article examines the impact of corporate income taxation on a company’s financial results, with particular attention to its influence on profitability, cash flows, and strategic decision-making. To operate effectively, companies must allocate their budgets efficiently and optimize all types of expenses. Mandatory payments include taxes, among which corporate income tax plays a significant role, as it directly reduces an organization’s financial results. The relevance of the topic is driven by the ongoing changes in tax legislation and the need to maintain financial stability in a volatile economic environment.

Keywords: the corporate income tax; the financial results; the net profit; the profitability.

A company’s financial standing, the key indicator of which is profit, determines its viability and potential for development. This indicator is particularly important for small and medium-sized enterprises, as high profitability directly contributes to their stability, reduces financial risks, and provides the basis for self-financing, business expansion, and improving employee well-being. An excessive tax burden may result in insufficient financial resources for production, which can negatively affect product quality.

Corporate income tax represents a direct deduction from a company’s financial results. It is calculated by legal entities and paid to the state budget system within the timeframe established by law.

Taxes are a key instrument of government regulation in a market economy. By flexibly adjusting elements of the tax system—such as the tax base, rates, exemptions, and penalties—the state intentionally influences business activities, stimulating them in line with national development priorities.

Corporate Income Tax and Key Performance Indicators

In the context of economic analysis, corporate income tax serves as a regulator of financial performance, as it reduces the amount of net profit. Net profit is calculated by subtracting the amount of income tax paid, along with other post-tax expenses, from the total profit generated before taxation.

Thus, any change in the tax rate or tax base for corporate income tax directly affects the company’s final financial results. A decrease in net income means a reduction in available resources, which may limit growth prospects, investment activity, and dividend payments to business owners.

An important aspect is the impact of corporate income tax on profitability indicators, including return on sales, assets, and equity, which are calculated as the ratio of net profit to revenue. Since income tax reduces net profit, it consequently leads to a decline in the company’s overall profitability.

The calculation and payment of income tax represent a cash outflow that reduces the amount of funds available for reinvestment, dividend payments, and debt repayment.

In addition, the tax burden can influence the capital structure of the enterprise. The use of borrowed funds can reduce the tax base due to the possibility of deducting interest payments, which may serve as an incentive for debt financing. This mechanism enables companies to minimize their tax liabilities. However, excessive borrowing may increase financial risks.

To more fully examine the role of the tax system in shaping the financial results of an enterprise, it is important to consider both direct and indirect mechanisms of its impact. Direct influence is reflected in a reduction of profit volume, while indirect impact is manifested through management decisions and tax optimization strategies.

Table 1.

Direct and indirect impact on financial results

In conclusion, corporate income tax is not merely a formal obligation but a significant factor influencing a company’s net results, cash flows, and strategic decision-making, serving as an important financial regulator. It is essential to emphasize that the primary objective of tax management should not be minimizing tax liabilities at any cost or attempting to avoid taxation, but rather optimizing taxes through lawful methods and reducing the overall tax burden on the enterprise.

Thus, the study concludes that effective tax planning is an integral part of sound financial management and plays a crucial role in enhancing an organization’s final financial performance.

References:

1. Балахина Н.В., Косов М.Е. Финансы и налогообложение организаций: учебник. — М.: Юнити, 2018. — 231 с.
2. Высотин С.Н., Осипов Д.А. Характеристика методов анализа налоговой нагрузки и налогового бремени // Территория науки. — 2017. — № 1. — С. 47.
3. Молоканова М.С. Влияние налогообложения прибыли на финансовые результаты предприятий // Молодой ученый. — 2020. — № 51 (341). — С. 85—88. URL: https://moluch.ru/archive/341/76617
4. Налоговый кодекс Российской Федерации (часть первая) [Электронный ресурс]. URL: https://www.consultant.ru/document/cons_doc_LAW_19671/
5. Савицкая Г.В. Анализ хозяйственной деятельности предприятия: учебник. — 9-е изд., перераб. и доп. — М.: Инфра-М, 2012. — 536 с.