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There are successful companies that don't make profits, such as twitter, uber, amazon. My question is:

Can a company just reinvest lots of money to avoid making a profit and avoid paying tax?

From my economy 101 class I remember that you can only reinvest with money after paying a tax on profits.

What am I missing?

Reason for asking is that a company I was working for often refused to raise salaries on the ground of low profits while sales were great. Perhaps low profits was the result of a strategy instead of a sign of weakness.

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    $\begingroup$ It would be helpful to support your claim about twitter, uber, amazon with a reference - I'm not sure it's common knowledge. $\endgroup$ Sep 26 at 10:06
  • $\begingroup$ @AdamBailey If it is in wikipedia, or has a lot of hits on google with a simple search query, it may be considered common knowledge $\endgroup$
    – Roland
    Sep 27 at 6:56

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All else constant, a higher level of investments results in higher depreciation and re-valuations or "write-downs", and these higher charges to revenue result in lower taxable profits and lower taxes.

A quote...

I remember that you can only reinvest with money after paying a tax on profits

After an investment is made, depreciation is a periodic charge so it will affect the level of taxable profit (and taxes) in not only the current period but future periods.

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  • $\begingroup$ Does an increase in investment affect depreciation or payable taxes in the current period? $\endgroup$
    – Giskard
    Sep 26 at 7:49
  • $\begingroup$ @Giskard depreciation is affected in the period of a new investment or an increase in total investment, so yes. $\endgroup$
    – H2ONaCl
    Sep 26 at 13:15

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