Non-debt tax shield means that the depreciation of fixed assets, amortization of intangible assets and amortization of long-term deferred expenses can be charged before tax, which has the same tax deduction effect as debt interest. It is often called "non-debt tax shield".

Tax shield refers to a tool or method that can avoid or reduce the tax burden of enterprises.

For example, a company's annual profit is 200,000 yuan. When there is no debt, the income tax is 66,000 yuan, and the net profit is134,000 yuan. In the case of borrowing money, other conditions have not changed, and only the interest expense of 65,438+10,000 yuan needs to be paid.

Since the interest expense of 654.38+10,000 yuan is charged before tax, the enterprise only needs to pay the income tax of 33,000 yuan. Although the total profit decreased by 654.38+million yuan due to the interest payment, the net profit decreased to 67,000 yuan, and the decrease of 33,000 yuan was the result of "tax shield".

Extended data

The existence of tax shield changes the proportion of income before interest and tax among the government, creditors and shareholders, and forms a distribution structure that is beneficial to creditors and shareholders but not to the government. From a macro point of view, if the whole social economy pursues the tax shield effect, it will affect the timely and full acquisition of government fiscal revenue.

Taxes are levied because the government needs to provide public goods free of charge. Public goods such as national defense, public security, transportation, environmental protection and epidemic prevention must be provided by the government free of charge because of their non-exclusiveness and "free rider" phenomenon. When the government provides these public goods, it needs to buy corresponding services and commodities from the market.

The cost of these public goods must be compensated by value. And this compensation is achieved through taxation. If individuals in the whole social economy only pursue their own interests and pay less taxes as far as possible, it will affect the government's fiscal revenue, lead to the cost of public goods not being compensated, and will inevitably affect the quantity and quality of public goods provided by the government.

If we leave the corresponding public security, transportation, communication, environmental protection, education, social security and social relief facilities, the sustainable operation and long-term development of enterprises will be adversely affected.

Tax shield-Baidu encyclopedia