TD Bank 2010 Annual Report Download - page 19

TD BANK GROUP ANNUAL REPORT 2010 MANAGEMENT’S DISCUSSION AND ANALYSIS 17
(millions of Canadian dollars, except as noted) 2010 2009 2008
Income taxes at Canadian statutory income tax rate $ 1,761 30.5% $ 1,006 31.8% $ 1,342 32.7%
Increase (decrease) resulting from:
Dividends received (283) (4.9) (333) (10.5) (345) (8.4)
Rate differential on international operations (359) (6.2) (448) (14.1) (457) (11.1)
Agreement with Canada Revenue Agency 121 2.1 – – – –
Other – net 22 0.3 16 0.4 (3) (0.1)
Provision for income taxes and
effective income tax rate – reported $ 1,262 21.8% $ 241 7.6% $ 537 13.1%
(millions of Canadian dollars, except as noted) 2010 2009 2008
Provision for income taxes – reported $ 1,262 $ 241 $ 537
Adjustments for items of note: Recovery of (provision for) income taxes2
Amortization of intangibles 197 229 239
Reversal of Enron litigation reserve – – (154)
Fair value of derivatives hedging the reclassified available-for-sale debt securities portfolio 19 114 (23)
Integration and restructuring charges relating to U.S. Personal and Commercial Banking acquisitions 38 153 41
Fair value of credit default swaps hedging the corporate loan book, net of provision for credit losses 5 70 (62)
Income taxes due to changes in statutory income tax rates 11 – (34)
Insurance claims (8) – 10
General allowance increase (release) in Canadian Personal and Commercial Banking and Wholesale Banking (16) 77 –
Settlement of TD Banknorth shareholder litigation – 19 –
FDIC special assessment charge – 20 –
Agreement with Canada Revenue Agency (121) – –
Total adjustments for items of note 125 682 17
Provision for income taxes – adjusted 1,387 923 554
Other taxes
Payroll 316 283 242
Capital and premium 207 268 228
GST, HST and provincial sales 222 172 172
Municipal and business 133 126 106
Total other taxes 878 849 748
Total taxes – adjusted $ 2,265 $ 1,772 $ 1,302
Effective income tax rate – adjusted3 21.6% 17.2% 13.7%
TAXES
TABLE 10
RECONCILIATION OF NON-GAAP PROVISION FOR (RECOVERY OF) INCOME TAXES1
TABLE 11
The Bank’s effective income tax rate, on a reported basis, was
21.8% for 2010, compared with 7.6% in 2009. The year-over-year
increase was mainly due to an increase in net income before taxes,
a proportionate decrease in tax exempt income, a higher tax rate on
international operations, and a $121 million charge related to an
agreement with Canada Revenue Agency.
TD reports its investment in TD Ameritrade using the equity method
of accounting. TD Ameritrade’s tax expense of $132 million in the
year, compared to $196 million in 2009, is not part of the Bank’s tax
rate reconciliation.
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes increased by $1,050 million,
or
96%, from 2009. Income tax expense, on a reported basis, was up
$1,021 million, or 424%, from 2009. Other taxes were up $29 million,
or 3%, from 2009. Adjusted total income and other taxes were up
$493 million, or 28%, from 2009. Total income tax expense, on an
adjusted basis, was up $464 million, or 50%, from 2009.
The Bank’s adjusted effective income tax rate was 21.6% for 2010,
compared with 17.2% in 2009. The increase this year was mainly due
to an increase in adjusted net income before taxes, a proportionate
decrease in tax exempt income, and a higher effective tax rate on
international operations.
1 For explanations of items of note, see the “Non-GAAP Financial Measures −
Recon ciliation of Adjusted to Reported Net Income” table in the “Financial
Results
overview” section of this MD&A.
2 The tax effect for each item of note is calculated using the effective statutory
income tax rate of the applicable legal entity.
3 Adjusted effective income tax rate is the adjusted provision for income taxes
before other taxes as a percentage of adjusted net income before taxes.