Effective tax rate is a measure of how much tax a company pays as a percentage of its accounting income. It is calculated by dividing the company’s income tax expenses by its pretax income. The effective tax rate shows how much of a company’s income is reduced by taxes. The effective tax rate does not apply if the company has negative income tax expenses or pretax income. The formula for effective tax rate is:
Effective tax rate = (Income tax expenses / Pretax income) * 100
Where:
- Income tax expenses is IS018,
is_inc_tax_exp
- Pretax income is IS017,
is_pretax_income