Does anyone want to answer this?
https://twitter.com/aviralrashtriya/status/1328758214674956288
One answer is that company engages in hedging by using derivatives as a legitimate business decision and claims the hedging cost as a tax-deductible expense.
I don’t think losses if any resulting from speculative trades using derivatives will be allowed as a tax-deductible expense.
Also, when companies use all sorts of tricks to avoid paying taxes, it reveals something about the quality of the management. A substantial proportion of companies which create value for stockholders are those who also pay full taxes.
Indeed, the closer the tax to pretax earnings ratio is to the marginal tax rate for a company, the better is the market’s perception of the quality of its earnings. And that quality is usually reflected in the P/E multiple.
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