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10. Tax on profit on ordinary activities

a) Analysis of charge for the year from continuing operations

US$ million 2008 2007
United Kingdom corporation tax at 28.5% 18
United Kingdom corporation tax at 30% 163
South Africa tax 840 812
Other overseas tax 1,155 1,259
Prior year adjustments (78) (1)
Current tax (excluding special items and remeasurements tax) 1,935 2,233
Deferred tax (excluding special items and remeasurements tax) 610 443
Tax (excluding special items and remeasurements tax) 2,545 2,676
Special items and remeasurements tax (94) 17
Income tax expense – continuing operations 2,451 2,693

b) Factors affecting tax charge for the year

The effective tax rate for the year of 28.6% (2007: 30.5%) is approximately equal to the applicable standard rate of corporation tax for the year ended 31 December 2008 in the United Kingdom (28.5%) (2007: 30%). The reconciling items are:

US$ million 2008 2007(1)
Profit on ordinary activities before tax – continuing operations 8,571 8,821
Tax on profit on ordinary activities calculated at
United Kingdom corporation tax rate of 28.5%
2,443
Tax on profit on ordinary activities calculated at
United Kingdom corporation tax rate of 30%
2,646

Tax effect of share of net income from associates
(317) (59)

Tax effects of:
Special items and remeasurements
Operating special items and remeasurements 28 15
Profits and losses on disposals and financing remeasurements (255) (71)
Tax remeasurements 153
Items not taxable/deductible for tax purposes
Exploration expenditure 20 19
Non-deductible net foreign exchange loss 28 2
Non-deductible net interest expense 10
Other non-deductible expenses 127 83
Other non-taxable income (78) (41)
Temporary difference adjustments
Changes in tax rates (84) 12
Movements in tax losses 38 13
Enhanced tax depreciation (26) (91)
Other temporary differences 42 (14)
Other adjustments
Secondary tax on companies and dividend withholding taxes 634 644
Effect of differences between local and UK rates (181) (517)
Prior year adjustments to current tax (78) (1)
Other adjustments (53) 53
Income tax expense – continuing operations 2,451 2,693
(1)
Comparatives have been reclassified to align with current year presentation.

IAS 1 requires income from associates to be presented net of tax on the face of the income statement. Associates' tax is therefore not included within the Group's total tax charge. Associates' tax included within 'Share of net income from associates' for the year ended 31 December 2008 is $606 million (2007: $303 million). Excluding special items and remeasurements this becomes $623 million (2007: $305 million).

The effective rate of tax before special items and remeasurements including share of associates' tax for the year ended 31 December 2008 was 33.4%. This was an increase from the equivalent effective rate of 31.8% in the year ended 31 December 2007. The main reasons for this net increase are tax losses not recognised for deferred tax purposes and changes in the geographical mix of profits around the Group, partially offset by changes in statutory tax rates and the impact of prior year adjustments. In addition, the 2007 rate benefited from the availability of enhanced tax depreciation on certain assets. In future periods it is expected that the effective tax rate, including associates' tax, will remain at or above the UK statutory tax rate.

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