Tax Base: A Simple 5-minute Guide

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A tax base is the total value of assets or income that can be taxed by the relevant authority (usually the government). You should understand that there is a difference between Tax rate and Tax base; the tax base is the amount to which a tax rate is applied while the tax rate is the percentage that must be paid in taxes.

The rate of tax imposed varies depending on the type of tax and the tax base total. Income tax, gift tax, and estate tax are each calculated using a different tax rate schedule. An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective income or profits (taxable income). Income tax generally is computed as the product of a tax rate and taxable income. Taxation rates may vary by the type or characteristics of the taxpayer.

Also, read What Employee Compensation Is Taxable

The tax base is the total value of assets and liabilities at a particular point in time. It’s used to calculate taxes, which are due to the income earned by businesses. The tax base also determines how much tax you have to pay as a percentage of your profits or lost income.

It is comprised of two parts: your income and your expenses. The income you earn from a business will determine how much tax you owe, while the expenses incurred in running that business count towards reducing the amount of taxes you pay.

If you’re starting a new business, it’s important to understand how it affects your financial situation. If you don’t have enough money coming in or too much going out, your business won’t last long. You’ll need to make sure that everything is profitable so that you can continue growing your company.

How to Calculate Tax Base

tax base

Taxes can be based on any kind of asset or revenue stream. To calculate the total tax liability, multiply the tax base by the tax rate: 

It is the total amount of assets or revenue that a government can tax, it is important to try as much as possible to keep accurate accounts of the business’s assets and revenue in order to be able to get an accurate tax rate.


In this article, you’ve learned more about the concept of tax base and how it can be calculated. You should now have a better understanding of why income tax is so complicated for taxpayers and what determines their liability.

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