Anglo American Annual Report 2012

FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS11. INCOME TAX EXPENSEa) Analysis of charge for the yearUS$ million 2012 2011United Kingdom corporation tax (credit)/charge (12) 16South Africa tax 802 1,307Other overseas tax 605 1,067Prior year adjustments 61 (92)Current tax (1) 1,456 2,298Deferred tax 32 443Income tax expense before special items and remeasurements 1,488 2,741Special items and remeasurements tax (1,113) 119Income tax expense 375 2,860(1)Includes royalties which meet the definition of income tax and are in addition to royalties recorded in operating costs.b) Factors affecting tax charge for the yearThe effective tax rate for the year of (156.9)% (2011: 26.5%) is lower than (2011: same as) the applicable weighted average statutory rate of corporation tax inthe United Kingdom of 24.5% (2011: 26.5%). The reconciling items, excluding the impact of associates, are:US$ million 2012 2011(Loss)/profit before tax (239) 10,782Less: share of net income from associates (432) (977)(Loss)/profit before tax (excluding associates) (671) 9,805Tax on (loss)/profit (excluding associates) calculated at United Kingdom corporation tax rate of 24.5% (2011: 26.5%) (164) 2,598Tax effects of:Items not taxable/deductible for tax purposesExploration expenditure 43 27Non-taxable/deductible net foreign exchange loss 7 24Non-taxable net interest income (25) (20)Other non-deductible expenses 51 60Other non-taxable income (63) (57)Temporary difference adjustmentsCurrent year losses not recognised 86 38Recognition of losses not previously recognised (69) (103)Other temporary differences (40) (57)Special items and remeasurements 305 77Other adjustmentsSecondary tax on companies and dividend withholding taxes 26 407Effect of differences between local and United Kingdom rates 68 (61)Prior year adjustments to current tax 61 (92)Other adjustments 89 19Income tax expense 375 2,860IAS 1 requires income from associates to be presented net of tax on the face of the income statement. Associates’ tax is therefore not included within theGroup’s income tax expense. Associates’ tax included within ‘Share of net income from associates’ for the year ended 31 December 2012 is $205 million(2011: $384 million). Excluding special items and remeasurements this becomes $202 million (2011: $385 million).The effective rate of tax before special items and remeasurements including attributable share of associates’ tax for the year ended 31 December 2012 was29.0%. The increase compared to the equivalent effective tax rate of 28.3% for the year ended 31 December 2011 is due to the reduced impact of certainnon-recurring factors. The non-recurring factors in 2012 include further recognition of previously unrecognised tax losses and the reassessment of certainwithholding tax provisions across the Group. In future periods it is expected that the effective tax rate, including associates’ tax, will remain above the UnitedKingdom statutory tax rate.c) Tax amounts included in total comprehensive incomeAn analysis of tax by individual item presented in the Consolidated statement of comprehensive income is presented below:US$ million 2012 2011Tax on items recognised directly in equityNet gain on revaluation of available for sale investments (79) (26)Net (gain)/loss on cash flow hedges (1) 20Net exchange difference on translation of foreign operations (16) 11Actuarial net (gain)/loss on post employment benefit plans (19) 19(115) 24Tax on items transferred from equityTransferred to income statement: disposal of available for sale investments 30 –Transferred to initial carrying amount of hedged items: cash flow hedges (1) (12)Transferred to income statement: cash flow hedges – (2)29 (14)d) Tax amounts recognised directly in equityCapital gains tax of $290 million relating to the profit on sale of a 25.4% share in Anglo American Sur SA (AA Sur) in August 2012 has been charged directlyto equity (2011: $1,017 million relating to the profit on sale of a 24.5% share in AA Sur in November 2011). There were no other material current tax amountscharged directly to equity in 2012 or 2011. Deferred tax of $110 million has been charged directly to equity (2011: charge of $127 million), see note 27.158 Anglo American plc Annual Report 2012