April 2005 Edition
We are pleased to present the latest edition of PricewaterhouseCoopers’ Effective tax rates comparison: Global mining industry. This study has been compiled for the past five years, semi-annually since 2003, as a tool for benchmarking the financial impact of taxes on the global mining industry’s financial position.
A company’s effective tax rate is the ratio of its income tax expense (cash and deferred tax) to its pre-tax earnings. It typically differs substantially from the statutory tax rate in the company’s reporting jurisdiction, and under generally accepted accounting principles (GAAP) this difference must be explained in the annual report. In this study, we have compiled these reconciliations to identify significant recurring adjustments and various trends that we believe may be useful to industry stakeholders, including investors, management, advisors, government tax authorities and policy makers.
The effective tax rate is important because it can indicate the extent to which taxes influence a company’s financial results, and can reveal which activities are tax efficient from those which are not. For example, foreign exchange has been a significant adjustment to many companies’ effective tax rate over the past few years due to volatility in the US dollar. This indicates that much of this volatility is neither taxable nor deductible in the companies’ respective taxing jurisdictions. This could be a result of the tax laws in that jurisdiction, or because the foreign exchange is arising in a different jurisdiction from operations (e.g. a tax haven or loss-making affiliate), or for some other reason.
We examined 52 companies, from all continents around the world, using their latest (generally 31, December 2004) financial results. Our study uses only publicly available information. No proprietary information is disclosed. However, the standards for financial disclosure under GAAP have evolved to the point where much can be learned from a careful reading of this information.
Contact Name
This publication was produced by the US Mining Tax Team in Phoenix.
For questions or comments please contact
Steve Ralbovsky(US Mining Leader) or
Jennifer Baska at +1 (602) 364-8000.
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