HSBC 2012 Annual Report Download - page 423

421
Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
9 Tax
Tax charged to the income statement
2012 2011 2010
US$m US$m US$m
Current tax
UK corporation tax ..................................................................................................... 250 820 383
– for this year ........................................................................................................... 60 462 404
– adjustments in respect of prior years .................................................................... 190 358 (21)
Overseas tax1 .............................................................................................................. 5,560 4,255 3,328
– for this year ........................................................................................................... 5,421 4,155 3,235
– adjustments in respect of prior years .................................................................... 139 100 93
5,810 5,075 3,711
Deferred tax ................................................................................................................ (495) (1,147) 1,135
Origination and reversal of temporary differences ................................................. (269) (1,178) 1,176
Effect of changes in tax rates .................................................................................. 66 (3) 31
Adjustments in respect of prior years ...................................................................... (292) 34 (72)
Total tax charged to the income statement.................................................................. 5,315 3,928 4,846
1 Overseas tax included Hong Kong profits tax of US$1,049m (2011: US$997m; 2010: US$962m). The Hong Kong tax rate applying to
the profits of subsidiaries assessable in Hong Kong was 16.5% (2011: 16.5%; 2010: 16.5%). Other overseas subsidiaries and overseas
branches provided for taxation at the appropriate rates in the countries in which they operate.
Tax reconciliation
The tax charged to the income statement differs to the tax charge that would apply if all profits had been taxed at the
UK corporation tax rate as follows:
2012 2011 2010
US$m % US$m % US$m %
Profit before tax................................................................ 20,649 21,872 19,037
Tax at 24.5% (2011: 26.5%; 2010: 28.0%) ..................... 5,057 24.5 5,796 26.5 5,330 28.0
Impact of differently taxed overseas profits .................... (57) (0.3) (492) (2.2) (744) (3.9)
Adjustments in respect of prior period liabilities ............ 37 0.2 495 2.3 – –
Deferred tax temporary differences not recognised/
(previously not recognised) ......................................... 374 1.8 (923) (4.2) (6) –
Effect of profits in associates and joint ventures ............ (872) (4.3) (865) (4.0) (758) (4.0)
Tax impact of intra-group transfer of subsidiary ............ – – – – 1,216 6.4
Tax impact of disposal of Ping An .................................. (204) (1.0) – – – –
Non taxable income and gains ......................................... (542) (2.6) (613) (2.8) (700) (3.7)
Permanent disallowables ................................................. 1,092 5.3 467 2.1 355 1.9
Change in tax rates .......................................................... 78 0.4 (3) – 31 0.2
Local taxes and overseas withholding taxes ........................ 581 2.8 267 1.2 224 1.2
Other items........................................................................ (229) (1.1) (201) (0.9) (102) (0.6)
Total tax charged to the income statement ...................... 5,315 25.7 3,928 18.0 4,846 25.5
The effective tax rate for the year was 25.7% compared with 18.0% for 2011. The higher effective tax rate in
2012 reflects the non tax deductible effect of fines and penalties as part of the settlement of investigations into past
inadequate compliance with anti-money laundering and sanction laws, together with the non-recognition of the tax
benefit in respect of the accounting charge associated with negative fair value movements on own debt. The lower
effective tax rate in 2011 included the benefit of deferred tax of US$0.9bn in respect of foreign tax credits in the US.
The UK corporation tax rate applying to HSBC Holdings and its subsidiaries was 24.5% (2011: 26.5%; 2010: 28%).
The UK Government announced that the main rate of corporation tax for the year beginning 1 April 2012 will reduce
from 26% to 24% to be followed by a 1% reduction to 23% for the year beginning 1 April 2013 and a further 2%
reduction to 21% for the year beginning 1 April 2014. The reduction in the corporate tax rate to 24% was
substantively enacted in the first half of 2012 and this results in a weighted average rate of 24.5% for 2012