Effective tax rate (ETR) represents the actual percentage of tax levied on a company’s profits. ETR can be higher or lower than the statutory (nominal) corporate income tax (CIT) rate due to various adjustments to accounting profits prescribed by the CIT Law in order to arrive at taxable profits (depreciation, impairment, non-deductible expenses etc).
ETR is also an indicator of how well the company manages its CIT cost.
Lack of alignment between business strategies and tax planning can result in missed opportunities and create unnecessary significant tax risks and costs.
In order to optimize the ETR the company needs a tax strategy that would be fully aligned with business objectives and plans and legislation requirements.