How is 'current tax expense' typically determined?

The determination of 'current tax expense' fundamentally relies on the evaluation of taxable profit in relation to the applicable tax rate. Specifically, taxable profit represents the portion of income that is subjected to tax, which is calculated based on the organization's revenue stream adjusted for any allowable expenses, losses, and deductions. Once the taxable profit is established, the current tax expense is computed by multiplying this figure by the tax rate that applies for that accounting period.

This approach aligns with the principles of accrual-based accounting, whereby taxes are recognized in the period in which the associated income is earned, rather than when tax payments are made. By focusing on the actual taxable income and the statutory tax rate, this method ensures that the current tax expense accurately reflects the company's liability towards income tax for the period.

In contrast, other methods mentioned do not properly represent the calculation of current tax expense. For instance, assessing previous years' profits would not account for variations in taxable income or changes in tax laws. Estimating future tax rates could lead to non-compliance as tax liability is determined by current regulations rather than projections. Finally, simply subtracting deductions from gross revenue does not account for the legislation governing the taxable profit calculation, nor does it capture the full extent of revenue and allowable