Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Provision/pre-tax income (all GAAP of course) is the correct thing for effective tax rate because
the only difference between this and actual cash taxes paid is one of timing. Over a long (in
Berkshire's case very very long) period of time cash taxes paid will match up with the provision.


Thanks for your explanation this and your other comments very nicely explain the reason for the difference between note 13 and note 16.

Provision for taxes (for 2016) was: $9.2B (your $6.5B is simply the current provision; actual cash
taxes paid was actually just $4.7B). So, the effective tax rate was (on $33.6B of pre-tax income)
27%.


When I divide 33.6 by 4.78 I get an effective tax rate 14% not 27%
The figures for 2015 and 2014 14.6% and 13% this gives us a much average of 13.7%. Which makes more sense to me as I think I remember Buffett answering a question at an annual meeting to the effect that Berkshire effective rate was around 13%.

14% times a 57% tax cut (7.98%) still leaves us with an effective rate below 6% going forward.

Is there any way estimating how much of the difference between the statutory rate and the effective rate is deductions and how much is tax credits?
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.