Income Tax Paid

Income tax paid shows the actual cash the company paid in income taxes during the period. It can differ from the tax expense in the income statement because that number is based on accounting rules, not pure cash.

The difference between tax expense and taxes paid arises from:

• Timing differences: Depreciation methods, revenue recognition timing
• Deferred taxes: Taxes that will be paid or recovered in future periods
• Tax credits: R&D or investment credits that reduce cash taxes
• Loss carryforwards: Past losses that offset current taxable income

Why cash taxes matter:

• True cash outflow: Shows actual money leaving the business
• Effective tax rate: Cash taxes divided by pre-tax income reveals the real tax burden
• Tax efficiency: Low cash taxes relative to income statement tax may indicate aggressive tax planning
• Future obligations: Deferred taxes will eventually become cash payments

Companies with significant deferred tax liabilities may face higher future cash tax payments when timing differences reverse. Compare cash taxes to reported tax expense over multiple years to understand the company's tax position.