TaxRate

Tax rate is the percentage of a tax base that must be paid as tax. It is applied to a base such as income, corporate profits, consumption, property, or other taxable quantities and is usually expressed as a percentage or fraction. Tax rates can be fixed across all taxpayers or structured progressively, with higher rates applying to larger bases.

Two closely related concepts are statutory rate and effective rate. The statutory rate is the official rate set by law, while the effective rate reflects deductions, credits, exemptions, and other adjustments that reduce the total tax liability. In progressive systems, the marginal tax rate applies to the next dollar of base earned, while the average or effective rate is the total tax paid divided by the base.

Tax rates vary by tax type. Income taxes levy rates on earnings, often with brackets. Corporate taxes apply to profits earned by businesses. Consumption taxes such as value-added tax or sales tax apply a rate to purchases. Other forms include capital gains taxes and property taxes. Some jurisdictions also impose social charges or surtaxes that raise the total rate applied to certain bases.

Policy use of tax rates aims to raise revenue, influence economic behavior, and address distributional goals. Higher rates can increase revenue but may affect work, saving, and investment incentives, while lower rates may stimulate activity but reduce revenue. Rates and their brackets or bands are adjusted over time and differ by jurisdiction, taxpayer status, and available exemptions or credits.