Financial Statements and Notes - Canadian Oil Sands
Financial Statements and Notes - Canadian Oil Sands
Financial Statements and Notes - Canadian Oil Sands
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12. INCOME TAXES<br />
a) Taxation of the Trust<br />
Payments received by the Trust in the form of royalty payments, interest, distributions or other income<br />
from its subsidiaries are taxable income to the Trust. As the Trust is entitled to deduct its cost of<br />
acquiring trust royalties, its administrative costs <strong>and</strong> distributions to Unitholders to the extent of its<br />
taxable income, the Trust is not expected to be liable for income taxes either currently or in the<br />
foreseeable future.<br />
In preparing the 2002 tax return, <strong>Canadian</strong> <strong>Oil</strong> S<strong>and</strong>s found that there was an error in the 2001 Trust<br />
tax return prepared by its former tax service provider. In September 2003, the Trust paid $10 million<br />
to CCRA being $9 million for the 2001 tax liability <strong>and</strong> the balance relating to accrued interest. <strong>Canadian</strong><br />
<strong>Oil</strong> S<strong>and</strong>s is currently taking action to recover the cash payment from the former tax service provider.<br />
As the exact amount of the recovery is not certain at this time, the item has been disclosed as a<br />
contingent gain (see Note 22).<br />
b) Taxation of the operating subsidiaries<br />
Operating subsidiaries of the Trust are subject to tax in the same manner as any other corporation.<br />
However, as royalty <strong>and</strong> interest payments made by the operating subsidiaries to the Trust are<br />
deductible in computing the operating subsidiaries’ taxable income, the operating subsidiaries are<br />
not expected to pay significant taxes either currently or in the future under existing tax legislation,<br />
with the exception of Large Corporations tax.<br />
The tax provision recorded on the consolidated financial statements differs from the amount computed<br />
by applying the combined <strong>Canadian</strong> federal <strong>and</strong> provincial income tax statutory rate to income before<br />
tax as follows:<br />
2003 2002<br />
Income before taxes $ 323,098 $ 275,341<br />
Statutory rates<br />
Federal 38.00% 38.00%<br />
Federal abatement -10.00% -10.00%<br />
Federal surtax 1.12% 1.12%<br />
Alberta provincial rate 12.62% 13.12%<br />
41.74% 42.24%<br />
Expected taxes at statutory rate $ 134,861 $ 116,304<br />
Add (Deduct) the tax effect of:<br />
Net income of the Trust – tax sheltered (127,493) (112,966)<br />
Resource allowance (21,006) (23,559)<br />
Non-deductible Crown charges 3,140 2,545<br />
Capital tax 7,764 2,664<br />
2001 Reassessment 9,262 –<br />
Tax rate changes 12,577 –<br />
Increase to valuation allowance – 19,000<br />
Other (3,929) 1,425<br />
Provision for taxes $ 15,176 $ 5,413<br />
<strong>Canadian</strong> <strong>Oil</strong> S<strong>and</strong>s Trust Annual Report 2003