Notes to the group financial statements

FOR THE YEAR ENDED 30 JUNE 2011
 
 
 
 
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15  

Taxation  

         
  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
        Taxation by region      
        SA taxation      
  43   (23)    Mining tax (a)  (4)  6  
  44   9     Current year   1   6  
  (1)  (32)    Prior year overprovision   (5)  –  
  41   28     Non-mining tax (b)  4   5  
  40   28     Current year   4   5  
  1   –     Prior year underprovision   –   –  
  364   (282)    Deferred tax (c)  (40)  48  
  –   85     – Current year   12   –  
  –   (367)    – Previously unrecognised temporary differences   (52)  –  
  –   7     Secondary Tax on Companies (STC)  1   –  
  448   (270)      (39)  59  
        Foreign taxation      
  (113)  (210)    Deferred tax (d)  (30)  (15) 
  335   (480)    Total taxation   (69)  44  
        Taxation by type      
  43   (23)    Mining tax   (4)  6  
  41   28     Non-mining tax   4   5  
  251   (492)    Deferred tax   (70)  33  
  –   7     STC   1   –  
  335   (480)      (69)  44  

  (a) 

Mining tax on gold mining income in South Africa is determined according to a formula, based on the taxable income, net of any qualifying capital expenditure from mining operations. 5% of total mining revenue is exempt from taxation while the remainder is taxable at a higher rate than non-mining income as a result of applying the gold mine formula. All qualifying mining capital expenditure is deducted from taxable mining income to the extent that it does not result in an assessed loss. Accounting depreciation is eliminated when calculating the South African mining tax income. Excess capital expenditure is carried forward as unredeemed capital to be claimed from future mining taxable income. The group has several tax paying entities in South Africa. In terms of the mining ringfencing application, each ringfenced mine is treated separately and deductions can normally only be utilised against mining income generated from the relevant ringfenced mine.  

   

Gold mining companies within the group that have elected to be exempt from Secondary Tax on Companies (STC) are taxed at higher rates than those that have not made the election.  

  (b) 

Non-mining income is taxed at 35% (exempt from STC) and 28% (no election made). Non-mining companies are taxed at the statutory corporate rate of 28%.  

  (c) 

The deferred tax rate used to calculate deferred tax is based on the current estimate of future profitability when temporary differences will reverse, based on tax rates and tax laws that have been enacted at balance sheet date. Depending on the profitability of the operations, the deferred tax rate can consequently be significantly different from year to year. The only significant movement in the deferred tax rate was at Evander Gold Mines Limited, where the tax rate changed from 22.9% to 11.5%. This was due to the annual review of the life-of-mine of the operation.  

  (d)  Mining and non-mining income of Australian and PNG operations are taxed at a standard tax rate of 30%.  

  Income and mining tax rates  
 

The tax rates remained unchanged for the 2011 and 2010 financial years.  

  Major items causing the group’s income tax provision to differ from the maximum mining statutory tax rate of 43% (2010: 43%) were:  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  (75)  (50)    Tax on net profit from continuing operations at the maximum mining statutory tax rate   (6)  (10) 
  (144)  (42)    Non-allowable deductions   (6)  (19) 
  24   (22)    (Loss)/profit from associates   (3)  3  
  16   20     Difference between effective mining tax rate and statutory mining rate on mining income   3   2  
  22   15     Difference between non-mining tax rate and statutory mining rate on non-mining income   2   3  
  (726)  (249)    Effect on temporary differences due to changes in effective tax rates   (36)  (95) 
  –   367     Previously unrecognised temporary differences1   52   –  
  –   32     Prior year overprovision – mining and non-mining tax   5   –  
  548   416     Capital allowance, sale of business and other rate differences   59   72  
  –   (7)    STC   (1)  –  
  (335)  480     Income and mining taxation   69   (44) 
  191%   (410%)    Effective income and mining tax rate   (493%)  183%  
 
1 The credit in 2011 of R367 million (US$53 million) is for the Freegold unredeemed capital allowance. The South African Revenue Service (SARS) previously disallowed Freegold’s “post 1973 gold mine” additional capital allowance claim, and also disallowed Freegold’s application of mining ringfencing. SARS withdrew the additional capital allowance claim on 10 March 2011, conceding that the Freegold operations are entitled to claim this capital allowance. The inclusion of the capital allowance caused an increase in the deferred tax asset on the balance sheet and the resulting credit in the income statement. Refer to note 38(b) for developments on the ringfencing application dispute.  

  Deferred tax  
  The analysis of deferred tax assets and liabilities is as follows:  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  (1 875)  (1 149)    Deferred tax assets   (170)  (246) 
  (1 688)  (1 003)    Deferred tax asset to be recovered after more than 12 months   (148)  (221) 
  (187)  (146)    Deferred tax asset to be recovered within 12 months   (22)  (25) 
  5 409   4 216     Deferred tax liabilities   623   709  
  5 125   3 916     Deferred tax liability to be recovered after more than 12 months   578   672  
  284   300     Deferred tax liability to be recovered within 12 months   45   37  
  3 534   3 067     Net deferred tax liabilities   453   463  

  Deferred tax liabilities and assets on the balance sheets as at 30 June 2011 and 30 June 2010 relate to the following:  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  5 422   5 589     Gross deferred tax liability   825   711  
  5 406   5 576     Amortisation and depreciation   823   709  
  –   (1)    Product inventory not taxed   –   –  
  16   14     Other   2   2  
  (1 887)  (2 522)    Gross deferred tax asset   (372)  (248) 
  (1 506)  (2 175)    Unredeemed capital expenditure   (321)  (198) 
  (269)  (268)    Provisions, including non-current provisions   (39)  (35) 
  (112)  (79)    Tax losses   (12)  (15) 
  (1)  –     Disposal groups classified as held-for-sale   –   –  
  3 534   3 067     Net deferred tax liability   453   463  

  Movement in the net deferred tax liability recognised in the balance sheet is as follows:  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  3 251   3 534     Balance at beginning of year   463   421  
  251   (492)    (Credit)/charge per income statement – continuing operations   (70)  33  
  –   34     Charge per income statement – discontinued operations   5   –  
  32   (9)    Foreign currency translation   55   9  
  3 534   3 067     Balance at end of year   453   463  

  As at 30 June, certain subsidiaries in the group had the following tax credits:  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  13 604   16 812     Unredeemed capital expenditure available for utilisation against future mining taxable income1   2 481   1 783  
  394   409     Tax losses carried forward utilisable against taxable income   60   52  
  469   470     Capital gains tax (CGT) losses available to be utilised against future CGT gains.   69   61  
  2 947   3 225     As at 30 June, the group has not recognised the following deferred tax asset amounts   476   386  
        The unrecognised temporary differences are:      
  8 165   8 977     Unredeemed capital expenditure2   1 325   1 070  
  114   113     Tax losses   17   15  
  469   469     CGT losses   69   61  
  1 190   1 190     Temporary differences relating to investments in associates   176   156  
  1 The three highest contributors were Avgold R8 977 million (US$1 325 million), Australia R4 684 million (US$691 million), Randfontein R1 531 million (US$226 million).
  2 Relates to Avgold. 

  Secondary Tax on Companies (STC) 
 

STC is a tax levied on South African companies at a rate of 10% with effect from 1 October 2007 on dividends distributed.  

 

Current and deferred tax are measured at the tax rate applicable to undistributed income and therefore only take STC into account to the extent that dividends have been received or paid.  

  On declaration of a dividend, the company includes the STC on this dividend in its computation of the income tax expense in the period of such declaration.  

  SA rand     US dollar
  2010   2011     Figures in million   2011   2010  
  141   –     Available STC credits at end of year   –   18  

  On 12 August 2011, the board of directors approved a final dividend for the 2011 financial year of 60 (2010: 50) SA cents per share (8.3 (2010: 6.8) US cents). The total dividend amounts to R258 million (US$35.9 million at date of declaration) (2010: R214 million) (US$29.3 million) based on issued shares at 30 June 2011. As the dividends declared exceed the STC credits available, STC on the amount of R258 million (US$35.9 million) (2010: R73 million (US$9.6 million)) is payable at a rate of 10%.  
 
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