The previous tax rate was 20%
What is tax rate?
Tax rate is the percentage of the earnings tax payers would pay to the government from their earnings as taxes.
It should be borne in mind that the new tax rate is 25% which has increased by 25% compared to the previous tax rate, which is the unknown.
The mathematical relationship between the current and prior tax rates is as shown below:
Current tax rate=previous tax rate*(1+% increase in tax rate)
Current tax rate=25%
previous tax rate=X
% increase in tax rate=25%
25%=X*(1+25%)
25%=X*1.25
X=25%/1.25
X=previous tax rate=20%
Technically speaking, an increase of 25% in 20% is 5%(i.e. 20%*25%=5%), which when added to the original 20% would give a tax rate of 25%.That the shortcut to affirming that the new tax rate of 25% is correct
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