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Stock buybacks are equivalent in purpose to dividends. Many investors prefer them because they are not taxable, unlike dividend income.

• ghaff 4y ago
  They are taxable (assuming they turn into stock appreciation which ASML has not been great at for a while) but at a lower capital gains rate.
  • ericbarrett 4y ago
    The buyback event itself is not taxable. For dividends, the recipient must still pay taxes even if they are reinvested (as is common) and this cash flow and tax burden is unwelcome for larger investors.
    • ghaff 4y ago
      No. But the whole point of a buyback is that it will presumably cause stock appreciation and that appreciation is taxable, albeit at a lower rate and not until the stock is sold.
      • eastAligned 4y ago
        In large or complex arrangements the share might never be sold, instead being used as leverage or as part of more complex tax avoidance strategies. Far better than a dividend.
        • HDThoreaun 4y ago
          Or just held until death at which point no capital gains taxes are owed
      • qaq 4y ago
        Only if you sell and are not using a structure that will shield you from taxes until an actual withdrawal is made. You can also take out a loan using the stock as collateral to avoid being taxed.
      • lotsofpulp 4y ago
        In the US, dividends from stocks held more than a certain amount of time are taxed as capital gains (qualified dividends): https://www.investopedia.com/terms/q/qualifieddividend.asp https://www.investopedia.com/terms/q/qualifieddividend.asp
      • bufferoverflow 4y ago
        Appreciation on its own is not a taxable event. Only if you sell after said appreciation.
        • FooBarWidget 4y ago
          That depends on the tax jurisdiction and circumstances. In the Netherlands, appreciation is immediately taxable for individuals, but not for corporations.
          • gdy 4y ago
            And what about depreciation?
          • benj111 4y ago
            How does that work in practice? I presume you don't send a cheque off for €1.36 at the end of the day, (or receive a cheque back after 8 months)
            • Flashtoo 4y ago
              You pay an annual % tax on the value of your investments less debt as of January 1st. This means you still pay taxes if your assets lose value, too. It's a wealth tax that pretends to be a capital gains tax.
              • benj111 4y ago
                Ok. I'd quibble about it being a capital gains tax at all, but anyway.
              • roel_v 4y ago
                It doesn't pretend to be a capital gains tax at all. It's a tax on income from assets, which is in practice more or less a 'wealth tax' which is also why it's called the Dutch word for 'wealth tax' in the first place.
      • benj111 4y ago
        On the UK we have ISAs that are sheltered from capital gains tax. But not from dividend taxes. The same applies to pensions. Of course this state of affairs relies on companies not all jumping to stock buybacks, or else the treasury will find some new way of getting their pound of flesh
• naasking 4y ago
  > Stock buybacks are equivalent in purpose to dividends. Stock buybacks manipulate the stock price. That's not an equivalent purpose. It even used to be illegal.