HSBC 2003 Annual Report Download - page 56

HSBC HOLDINGS PLC
Financial Review (continued)
54
Goodwill amortisation was higher than in the
previous year, mainly due to the acquisition of
Household.
At 31 December 2003, there were potential
future tax benefits of US$963 million (2002:
US$885 million). The potential benefits are in
respect of trading losses, allowable expenditure
charged to the profit and loss account but not yet
allowable for tax, and capital losses which had not
been recognised because realisation of the benefits
was not considered more likely than not.
Year ended 31 December 2002 compared with
year ended 31 December 2001
HSBC Holdings and its subsidiary undertakings in
the United Kingdom provided for UK corporation
tax at 30 per cent, the rate for the calendar year 2002
(2001: 30 per cent).
Overseas tax included Hong Kong profits tax of
US$408 million (2001: US$450 million) provided at
a rate of 16 per cent (2001: 16 per cent) on the profits
assessable in Hong Kong. Other overseas taxation
was provided for in the countries of operation at the
appropriate rates of taxation.
HSBC’s effective tax rate of 26.3 per cent in
2002 was higher than that for 2001 (24.9 per cent),
mainly as a result of changes in the geographic mix
of profits and certain non-recurring items occurring
in 2001 which reduced the 2001 rate.
In particular, profits arising in North America
represented a higher percentage of HSBC’s profits in
2002 compared with 2001 because profits in the US
were abnormally suppressed in 2001 by the provision
relating to the Princeton Note settlement. US profits
were taxed at a higher rate than the average for the
rest of the Group and thus this change in mix raised
the overall tax rate of the Group.
One-off tax-free gains arising in 2002 were less
than those in 2001.
Partly offsetting these factors, no tax relief was
assumed in respect of the bad debt provision and
other losses relating to Argentina. These losses and
provisions were lower in 2002 than in 2001. This had
the effect of increasing the aggregate tax rate in both
2002 and 2001, though to a lesser extent in 2002.
In 2002, prior year adjustments which resulted
in a reduction in the tax rate, mainly relating to audit
settlements, were less than similar adjustments in
2001.
At 31 December 2002 there were potential
future tax benefits of US$885 million (2001: US$906
million). The potential benefits were in respect of
trading losses, allowable expenditure charged to the
profit and loss account but not yet allowable for tax,
and capital losses which had not been recognised
because realisation of the benefits was not
considered more likely than not.