LensCrafters 2006 Annual Report Download - page 131

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS |131 <
Reconciliation between the Italian statutory tax rate and the effective tax rate is as follows:
Year ended December 31, 2004 2005 2006
Italian statutory tax rate 37.3% 37.3% 37.3%
Aggregate effect of different rates in foreign jurisdictions 0.5% 1.7% (1.5%)
Aggregate Italian tax benefit, net - (4.1%)
Aggregate effect of asset revaluation in Australia (6.8%)
Permanent differences, principally losses in subsidiary
companies funded through capital contributions, net
of non-deductible goodwill (2.4%) - -
Effect on stock-based compensation 3.0% 5.5%
Aggregate other effects - (0.9%) 0.7%
Effective rate 35.4% 37.0% 35.2%
The 2005 aggregate Italian tax benefit is caused by the Company complying with an Italian law that
allows for the step up in tax basis of certain intangible assets.
The 2006 tax benefit results from the adoption of a change in the tax law in Australia, which introduced a
tax consolidation regime for wholly owned group entities. The tax consolidation rules effectively pushed
down the cost of acquiring an entity (or group of entities) to the assets that the entity (or group) owns.
This resulted in resetting of asset cost basis for tax purposes, and in the relevant uplifts in fixed assets
and intangibles as at the date of tax consolidation which occurred in December 2006 when OPSM
lodged the consolidated 2005 tax return.
Beginning with fiscal year 2004, for income tax purposes, the Company and its Italian subsidiaries file
tax returns on a consolidated basis.