This paper clarifies the appropriate economic unit of effective tax rates. Effective tax rates should give the percentage of the economic profit to be paid to the state as taxes. Only effective tax rates defined in this economic unit allow for an economically meaningful comparison with the statutory tax rate in order to reveal inter-industry distortions and inter-asset distortions caused by taxation. The widely used effective tax rates of King and Fullerton (1984) and Devereux and Griffith (2003) both follow this concept. This clarification of the appropriate economic unit of effective tax rates allows for a general definition of effective tax rates. Based on indifference considerations, effective tax rates giving the percentage of the economic profit to be paid to the state as taxes can be calculated for arbitrary investments, including complex simulation models (such as the European Tax Analyzer). Such effective tax rates can also be compared directly to statutory tax rates or to the effective tax rates of King and Fullerton (1984) and Devereux and Griffith (2003).