Financial Statements and Notes - Canadian Oil Sands

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