Which formula represents the average rate of tax (ART)?

The average rate of tax (ART) is a measure that indicates the proportion of a taxpayer’s income that is paid as tax. The correct formula for calculating ART is given by dividing the total tax payable by the taxable income and then multiplying by 100 to express it as a percentage.

This is captured in the formula:

(tax payable / taxable income) × 100

Using this formula allows taxpayers to understand the overall rate of taxation they are subjected to, giving a clear picture of how much of their income goes toward tax obligations.

The other options do not accurately represent the ART. The formula involving change in tax payable and change in taxable income relates more to the marginal rate of tax rather than the average rate. The ratio of taxable income to tax payable does not yield a percentage that reflects the ART, and the formula that involves adding tax payable and taxable income and dividing by 100 does not correspond to how taxes are calculated relative to income. Thus, option A is accurate in illustrating how to derive the average rate of tax.