HSBC 2003 Annual Report Download - page 55

53
Taxation
Year ended 31 December
2003 2002 2001
US$m US$m US$m
Current taxation
UK corporation tax charge ......................................................................................... 547 684 416
Overseas taxation ....................................................................................................... 2,590 1,217 1,570
Joint ventures ............................................................................................................. 1(6
)
(13
)
Associates ................................................................................................................... 19 17 26
3,157 1,912 1,999
Deferred taxation
Origination and reversal of timing differences ........................................................... (5
)
615 (176
)
Effect of (increased)/decreased tax rate on opening asset ........................................... (7
)
–3
Adjustment in respect of prior periods ....................................................................... (25
)
7162
(37) 622 (11
)
Total charge for taxation ............................................................................................ 3,120 2,534 1,988
Effective taxation (per cent) ....................................................................................... 24.3 26.3 24.9
Standard UK corporation tax rate (per cent) ............................................................... 30.0 30.0 30.0
Year ended 31 December
2003 2002 2001
US$m US$m US$m
Analysis of overall tax charge
Taxation at UK corporation tax rate of 30 per cent (2002 and 2001: 30.0 per cent) ... 3,845 2,895 2,400
Impact of differently taxed overseas profits in principal locations ............................. (366
)
(472
)
(616
)
Tax free gains ............................................................................................................. (17
)
(19
)
(102
)
Argentine losses ......................................................................................................... (25
)
87 336
Goodwill amortisation ................................................................................................ 476 261 263
Amortisation of acquisition accounting adjustments .................................................. (331
)
––
Prior period adjustments ............................................................................................. (230
)
(90
)
(167
)
Other items ................................................................................................................. (232
)
(128
)
(126
)
Overall tax charge ....................................................................................................... 3,120 2,534 1,988
Year ended 31 December 2003 compared with
year ended 31 December 2002
HSBC Holdings and its subsidiary undertakings in
the United Kingdom provided for UK corporation
tax at 30 per cent, the rate for the calendar year 2003
(2002: 30 per cent).
HSBC’s effective tax rate of 24.3 per cent in
2003 was lower than the corporation tax rate of 30
per cent. The geographic mix of profits; fair value
accounting adjustments, which are ignored for tax
purposes; and prior period adjustments were the
main factors which reduced the rate. These were
partially offset by the effect of goodwill
amortisation, which is also ignored for tax purposes,
which increased the rate.
Overseas tax included Hong Kong profits tax of
US$483 million (2002: US$408 million) provided at
a rate of 17.5 per cent (2002: 16 per cent) on the
profits assessable in Hong Kong. Other overseas
taxation was provided for in the countries of
operation at the appropriate rates of taxation.
Profits arising in North America represented a
higher percentage of HSBC’s profits in 2003
compared with 2002 largely because of the
acquisition of Household. US profits are taxed at a
higher rate than the average for the rest of the Group
and this change in mix raised the effective tax rate.
A number of fair value acquisition accounting
adjustments relating to Household and HSBC
Mexico resulted in net credits to the profit and loss
account with no corresponding tax charge. A more
detailed explanation of the acquisition accounting
adjustments is disclosed in Note 8 of the ‘Notes to
the Financial Statements’ .
Prior period adjustments arose in 2003 which
reduced HSBC’s overall tax charge. These related
mainly to the recognition of deferred tax assets on
losses, which became more likely to be utilised. The
Group also reached agreement on a number of
settlements. in respect of outstanding matters on
prior year computations which allowed contingency
reserves to be released.