Cemex 1999 Annual Report Download - page 66

64
1997
CONSOLIDATED PARENT
Current Income Tax $ (1,495,290) (1,210,192)
Received from subsidiaries — 1,013,365
Deferred taxes — —
Utilization of tax loss carryforwards 957,111 957,111
Effects of inflation (note 3B) 29,387 —
$ (508,792) 760,284
Total IT includes $340,082, $290,389 and $240,588 from foreign subsidiaries and $310,239, $167,551 and $268,204
from Mexican subsidiaries for 1999, 1998 and 1997, respectively. The Company, as a holding company, prepares its
IT and BAT returns on a consolidated basis for its operations in Mexico, which resulted in tax benefits of $64,805 in
1999, $1,760,977 in 1998 and $760,284 in 1997.
The effects of inflation are not recognized for income tax purposes in some countries in which the Company operates,
or are recognized differently from the generally accepted accounting principles used by the Company. These effects,
as well as other differences between the accounting and the income tax basis, arising from the several income tax
rates and laws to which the Company is entitled in the countries in which it has operations, give rise to temporary
differences between the statutory tax rate and the effective tax rate presented in the income statement:
DECEMBER 31,
1999 1998 1997
% % %
Statutory tax rate 35.0 34.0 34.0
Utilization of tax loss carryforwards (27.9) (14.9) (14.2)
Additional deductions and tax credits for
income tax purposes 8.0 (20.0) (12.9)
Expenses and other non-deductible items (9.1) 5.9 4.8
Non-taxable sale of marketable securities
and fixed assets (2.4) 0.4 (3.6)
Difference between book and tax inflation 2.4 (6.9) (6.7)
Business assets tax 3.7 2.1 3.5
Depreciation 3.5 2.8 (0.3)
Inventories (6.6) (1.5) (0.1)
Others (0.4) 3.3 1.0
Effective consolidated tax rate 6.2 5.2 5.5
The Company, for its operations in Mexico has accumulated tax loss carryforwards regarding IT, which may be offset
against taxable income in the succeeding ten years according to the Income Tax Law:
YEAR IN WHICH TAX LOSS OCCURRED AMOUNT OF YEAR OF
CARRYFORWARD EXPIRATION
1995 $ 855,142 2005
For the year ending December 31, 1999, the Company utilized accumulated tax loss carryforwards against the period’s
taxable income of its operations in Mexico in the amount of $9,445,639, which generated a benefit of $3,305,974.
The Company and its subsidiaries in Mexico must generate returns to keep the benefit of the tax losses carryforward
generated from 1999 and up.
The BAT Law establishes a 1.8% tax levy on assets, indexed for inflation in the case of inventory, property, plant and
equipment after deducting certain liabilities.
The BAT levied in excess of IT for the period may be recovered, restated for inflation, in any of the succeeding ten
years, provided that the IT levied exceeds BAT levied in such period. The recoverable BAT as of December 31, 1999
is as follows:
YEAR IN WHICH BUSINESS ASSETS TAX EXCEEDED INCOME TAX AMOUNT OF YEAR OF
CARRYFORWARD EXPIRATION
1997 $ 133,374 2007
1999 314,400 2009
447,774
B) DEFERRED INCOME TAX
As of December 31, 1999, the Company has created a deferred income tax provision for the temporary differences of
results, over which it is reasonably estimated that in a defined period a benefit or liability is originated for tax effects
in the amount of $1,047 million.
During 1999, the Mexican Institute of Public Accountants (“IMCP”), issued the new Bulleting D-4 Accounting
treatment of income tax, business assets tax and employees’ profit sharing (“Bulletin D-4”). Bulletin D-4 requires the
determination of deferred IT through the application of the statutory IT rate, to the amount of temporary differences