The tax rate is the figure or percentage that is applied to the taxable base, and which determines the total tax liability, which is the amount of a tax to be paid.
The word levy comes from the Latin gravāmen, which means "burden".
Tax rates can be:
- A specific tax rate, is defined as a fixed tax rate, i.e. a fixed amount, which is applied on a specific number of units. For example, the tax on hydrocarbons is levied at a fixed amount per liter.
- Percentage tax rate: this is a percentage that is applied to the tax base. There are several types of percentage levies:
- Proportional levy: This levy is a fixed percentage applied to the tax base.
- A typical example is VAT (Value Added Tax).
- Progressive levy. These are those that vary according to the taxable base. As the taxable base increases, so does the percentage that is increased. In this case, the best known example is Personal Income Tax (IRPF), which applies a different tax rate for the different income brackets. In general, the higher the taxable income, the higher the tax rate, although there is a maximum tax rate above which, although the taxable income increases, the tax rate does not increase.
- Regressive taxation. This is the most atypical, since it decreases as the taxable base increases.
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