The tax rate is the percentage that is applied to the tax base for the calculation of the respective tax payable.
That is, the tax rate is the percentage that is multiplied by the amount subject to tax.
We must remember that the tax base is the amount on which a certain tax is obtained. In other words, to obtain the tax quota (the tax that must be paid) it is necessary to first calculate the tax base.
For example, in the case of Value Added Tax (VAT), if the sale value of the product is 110 euros, this is the tax base. So, if the taxable rate is 19%, the tax payable is 20.9 euros (110*19%), and the sale price is 130.9 euros (110+20.9).
Single and tiered tax rate
It should be noted that, for the same tax, the tax rate is not always the same, but can be staggered.
For example, for income tax, for a certain income range, the rate may be 20%. And, once that level is exceeded, the rate can go up to 35%.
It can be a scheme like the following (the income data is in monetary units or um and for a monthly period):
|greater than 10,000||40%|
So, if a person earns 6,000 um per month, there are two possibilities for calculating the tax:
- (2,000*0.2)+(4,000*0.35)=400+1,400=1,800 um
In other words, in the second case, part of the taxable income pays a rate, and another rate is applied to the rest.
Types of rates according to the rate-base relationship
According to the relationship between the tax rate and the tax base, we can find the following classification:
- Progressive rates: If the base is higher, the higher the applicable rate will be. For example, higher rates may be set for people with higher incomes.
- Proportional: All taxpayers pay the same percentage of their base. It may be the case of VAT, it is the same rate for everyone.
- Regressive: When, at a lower base, taxpayers end up paying a higher rate. It is the opposite of progressive rates.
Rates on quantities
Another point to keep in mind is that tax rates can be charged not only on amounts of money, but also on quantities of a good or product.
For example, you can set a rate that is calculated for every 1,000 liters of hydrocarbons, such as gasoline or oil.
Rate versus tax rate
We must also clarify that when we refer only to the concept of rate, this is a tax that a citizen or user must pay for the private use of a public domain good or service.
Unlike taxes, this tax is based on the principle of benefit, that is, there is a direct consideration to whoever pays the rate. On the other hand, when a tax such as VAT is paid, an immediate compensation is not received from the State.
For example, when you want to process the identity document, you must pay an administrative fee. This is not a tax rate because it does not correspond to a tax.