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22-06-2023, 02:40 PM
I found one simple explanation for this. The company had two segments - Domestic and Foreign. While the Foreign was profitable, the Domestic lost money thereby reducing the overall profits. But even though the Domestic had no taxes, when you calculate the overall tax rate you take to total tax divided by the total profits. The Domestic losses magnified the overall tax rate.
For example, let us say that the profits/(loss) for the Foreign and Domestic was $600 and ($400) respectively resulting in a total profit of $200 . And assumed that the taxes paid was $ 200 and zero for the Foreign and Domestic operations. Then the overall tax rate = 200 taxes /200 profits = 100 %. While it seems like an arithmetic problem, the real question is when will the Domestic ops be profitable
For example, let us say that the profits/(loss) for the Foreign and Domestic was $600 and ($400) respectively resulting in a total profit of $200 . And assumed that the taxes paid was $ 200 and zero for the Foreign and Domestic operations. Then the overall tax rate = 200 taxes /200 profits = 100 %. While it seems like an arithmetic problem, the real question is when will the Domestic ops be profitable