Tax Rate Percentage Definition and Explanation

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Quick Definition

Measures how well a company can keep its tax expenses under control.

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Tax Rate Percentage Formula

Explanation of Tax Rate Percentage

The Tax Rate Percentage is an estimation of the Tax Rate imposed on the company. A measurement of the Tax Rate Percentage over time can be used to determine how well the company is able to contain its tax expenses.

Importance of Tax Rate Percentage

A decreasing Tax Rate Percentage is generally a positive sign, but you will need to investigate why this is occurring. Some possible reasons could be the company has moved some of its operations to an area with a different Tax Rate, or the company is able to record a different value for the Tax Rate than the income tax it actually had to pay.

The Tax Rate imposed on a company does not usually change much, and any change needs to be researched further as this can be an indicator of large changes occurring within a company.