Tax Burden Ratio
Calculate the tax burden ratio, which is the ratio of a company’s net income to its income before tax, indicating how much of a company’s income is retained after taxes.
The tax burden ratio measures the portion of a company’s pretax earnings that it keeps after taxes; one minus the ratio is roughly the effective tax rate. A higher ratio means a lower tax charge. It is one of the components of the extended (five-step) DuPont analysis. This ratio provides insights into the tax efficiency of the company and its ability to manage its tax liabilities.
The formula is as follows:
\[\text{Tax Burden Ratio} = \text{Net Income} / \text{Income Before Tax}\]Also known as: tax efficiency ratio.
Tax Burden Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_tax_burden_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["ACN", "ORCL", "CSCO"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_tax_burden_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
What share of their income before tax did Accenture, Oracle and Cisco retain after taxes from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| ACN | 0.7619 | 0.7486 | 0.7527 | 0.7497 | 0.7483 |
| CSCO | 0.7986 | 0.8159 | 0.8234 | 0.8436 | 0.9171 |
| ORCL | 0.8782 | 0.9317 | 0.8915 | 0.8787 | 0.8662 |
Parameters
get_tax_burden_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |