TD Bank 2009 Annual Report Download - page 29

TD BANK FINANCIAL GROUP ANNUAL REPORT 2009 MANAGEMENT’S DISCUSSION AND ANALYSIS 25
FINANCIAL RESULTS OVERVIEW
Taxes
Reported total income and other taxes decreased by $195 million, or
15%, from 2008. Income tax expense, on a reported basis, was down
$296 million, or 55%, from 2008. Other taxes were up $101 million,
or 14%, from 2008. Adjusted total income and other taxes were up
$470 million, or 36%, from 2008. Total income tax expense, on an
adjusted basis, was up $369 million, or 67%, from 2008.
The Bank’s adjusted effective income tax rate was 17.2% for 2009,
compared with 13.7% in 2008. 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.
The Bank’s effective income tax rate, on a reported basis, was 7.6%
for 2009, compared with 13.1% in 2008. The year-over-year decrease
was primarily caused by a decrease in reported net income before taxes,
a proportionate increase in tax exempt income, and a lower effective
tax rate on international operations.
The Bank reports its investment in TD Ameritrade using the equity
method
of accounting. TD Ameritrade’s tax expense of $196 million
in the
year, compared to $178 million in 2008, is not part of the
Bank’s tax
rate reconciliation.
(millions of Canadian dollars, except as noted) 2009 2008 2007
Income taxes at Canadian statutory income tax rate $ 1,006 31.8% $ 1,342 32.7% $ 1,627 34.9%
Increase (decrease) resulting from
Dividends received (333) (10.5) (345) (8.4) (423) (9.1)
Rate differentials on international operations (448) (14.1) (457) (11.1) (336) (7.2)
Other – net 16 0.4 (3) (0.1) (15) (0.3)
Provision for income taxes and effective income tax rate – reported $ 241 7.6% $ 537 13.1% $ 853 18.3%
TAXES
TABLE 10
(millions of Canadian dollars, except as noted) 2009 2008 2007
Provision for income taxes – reported $ 241 $ 537 $ 853
Adjustments for items of note
Amortization of intangibles 229 239 184
Reversal of Enron litigation reserve –(154) –
Increase (decrease) in fair value of derivatives hedging the reclassified
available-for-sale debt securities portfolio 114 (23) –
Gain relating to restructuring of Visa –– (28)
TD Banknorth restructuring, privatization, and merger-related charges –– 28
Restructuring and integration charges relating to the Commerce acquisition 153 41 –
Increase (decrease) in fair value of credit default swaps hedging the corporate
loan book, net of provision for credit losses 70 (62) (16)
Other tax items –(34) –
Provision for insurance claims –10 –
General allowance increase (release) in Canadian Personal and
Commercial Banking (excluding VFC) and Wholesale Banking 77 – (21)
Settlement of TD Banknorth shareholder litigation 19 ––
FDIC special assessment charge 20 ––
Total adjustments for items of note 682 17 147
Provision for income taxes – adjusted 923 554 1,000
Other taxes
Payroll 283 242 218
Capital and premium taxes 268 228 191
GST and provincial 172 172 170
Municipal and business 126 106 89
Total other taxes 849 748 668
Total taxes – adjusted $ 1,772 $ 1,302 $ 1,668
Effective income tax rate – adjusted117.2% 13.7% 20.1%
RECONCILIATION OF NON-GAAP PROVISION FOR (RECOVERY OF) INCOME TAXES
TABLE 11
1Adjusted effective income tax rate is adjusted provision for income taxes before
other taxes as a percentage of adjusted net income before tax.