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Hi sir!
I was thinking could one of the advatanges of conglomerate diverisifcation be that the holding company can move around profits from its one business to another and not incur a dividend income tax as it happens in real life the big conglomerates do not incur dividend tax on their holding companies profits!If the businesses were truly diversified, I don’t see how the company could easily put up a case for the transfer of funds between group members. Moving profits is easier when the companies are related eg one supplying components to another so that the location of profits are affected by transfer prices. Or, one company holding patents and licensing another to use them.
If the holding companies businesses have different growth rates and grrowth aspects they could transfer excess cash and funds to the other business whoch is expected to grow?
Yes, either by lending to them directly or by paying a dividend to the holding company which then lends or invests in the needy division.
This is not likely to have an overall tax effect – or if it does that will depend on the legal jurisdiction the companies are in.
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