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How to calculate Effective Tax Rate?

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Question added by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies
Date Posted: 2015/05/19
Zahid Farooq
by Zahid Farooq , Taxation and Accounting Director , BMS Auditing

The effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed. An individual's effective tax rate is calculated by dividing total tax expense by taxable income. For corporations, the effective tax rate is computed by dividing total tax expenses by the firm's earnings before taxes. The effective tax rate is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income.

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