What ratio is income tax expense divided by pre-tax income?

What ratio is income tax expense divided by pre-tax income? Effective tax rate is the canonical answer.

For a company, the effective tax rate is generally calculated as income tax expense divided by income before tax, expressed as a percentage. If pre-tax income is $1 million and tax expense is $210,000, the reported effective rate is 21%.

This is not necessarily the same as the statutory tax rate. Tax expense can be affected by deductions, tax credits, tax-exempt income, foreign operations, changes in tax law, and temporary differences between accounting income and taxable income. Deferred tax accounting can therefore make the reported rate differ from the cash taxes paid in a particular year.

The measure can also become misleading when pre-tax income is very small, negative, or distorted by unusual one-time items. “Marginal tax rate” instead refers to the rate applied to an additional unit of income, while an effective rate summarizes the overall tax burden on the relevant income base.