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Effective Tax Rate

   Also found in: Legal, Acronyms, Wikipedia 0.21 sec.
Effective Tax Rate
The rate a taxpayer would be taxed at if taxing was done at a constant rate, instead of progressively.

Calculated as total tax paid divided by taxable income.

Notes:
This is the net rate a taxpayer pays if you include all forms of taxes.


Effective tax rate
The net rate a taxpayer pays on income that includes all forms of taxes. It is calculated by dividing the total tax paid by taxable income.


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Attempts to measure a corporation's worldwide effective tax rate may have had unexpected consequences for the tax function, which now bring into question the CTO's reporting structure.
The financial markets recognize that the savings generated by a lower effective tax rate generally translate into larger cash resources, lower-cost financing of operations and increased dividends.
The detriment of a high effective tax rate is the company is paying a high rate of tax on their book income, which reduces earnings per share.
 
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