Effective
The term effective tax rate has significantly different meanings when used in different contexts or by different sources. Generally it means some amount of tax divided by some amount of income or other tax base. In International Accounting Standard 12, it is defined as income tax expense or benefit for accounting purposes divided by accounting profit. In Generally Accepted Accounting Principles (United States), the term is used in official guidance only with respect to determining income tax expense for interim (e.g., quarterly) periods by multiplying accounting income by an "estimated annual effective tax rate," the definition of which rate varies depending on the reporting entity's circumstances. In U.S. income tax law, the term is used in relation to determining whether a foreign income tax on specific types of income exceeds a certain percentage of U.S. tax that would apply on such income if U.S. tax had been applicable to the income. The popular press, Congressional Budget Office, and various think tanks have used the term to mean varying measures of tax divided by varying measures of income, with little consistency in definition. An effective tax rate may incorporate econometric, estimated, or assumed adjustments to actual data, or may be based entirely on assumptions or simulations.
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Famous quotes containing the word effective:
“Society’s double behavioral standard for women and for men is, in fact, a more effective deterrent than economic discrimination because it is more insidious, less tangible. Economic disadvantages involve ascertainable amounts, but the very nature of societal value judgments makes them harder to define, their effects harder to relate.”
—Anne Tucker (b. 1945)
“Watteau is no less an artist for having painted a fascia board while Sainsbury’s is no less effective a business for producing advertisements which entertain and educate instead of condescending and exploiting.”
—Stephen Bayley (b. 1951)
“[Humanity] has unquestionably one really effective weapon—laughter. Power, money, persuasion, supplication, persecution—these can lift at a colossal humbug—push it a little—weaken it a little, century by century; but only laughter can blow it to rags and atoms at a blast. Against the assault of laughter nothing can stand.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)