Deutsche Post Annual Report 2008

19 Income taxes

€m

Current income tax expense

–384

–352

Current recoverable income tax

–379

–327

Deferred tax income from temporary differences

201

140

Deferred tax expense (previous year: tax income)
from the reduction in deferred tax assets from tax
loss carryforwards

–13

206

127

Income tax expense

–173

–200

Despite the decline in the profit from continuing operations, which was due mainly to the restructuring expenses in the USA, there was no effect on the tax expense because little or no income tax was paid as a result of the loss generated, and no deferred tax assets were recognised in respect of the resulting tax loss carryforwards.

The reconciliation to the effective income tax expense is shown below, based on consolidated net profit before income taxes and the expected income tax expense:

Reconciliation to effective income tax expense

€m

Profit/loss from continuing operations
before income taxes

1,188

–1,066

Expected income tax expense

474

–318

Deferred tax assets not recognised
for initial differences

–735

–420

Deferred tax assets of German Group companies
not recognised for tax loss carryforwards and
temporary differences

346

469

Deferred tax assets of foreign Group companies
not recognised for tax loss carryforwards and
temporary differences

424

Changes in tax rates at German Group companies

Effect of current taxes from previous years

–9

–45

Tax-exempt income and non-deductible expenses

118

Differences in tax rates at foreign companies

–86

–30

Other

Effective income tax expense from continuing
operations

173

200

The difference between the expected and the effective income tax expense is due in particular to temporary differences between the carrying amounts in the IFRS financial statements and in the tax accounts of Deutsche Post AG resulting from initial differences in the opening tax accounts as at 1 January 1995. In accordance with IAS 12.15 (b) and IAS 12.24 (b), the Group did not recognise any deferred tax assets on these temporary differences, which relate mainly to property, plant and equipment as well as to provisions for pensions and other employee benefits. The remaining temporary differences between the carrying amounts in the IFRS financial statements and in the opening tax accounts amount to €2.0 billion as at 31 December 2008 (previous year: €3.4 billion).

The effects from deferred tax assets of German Group companies not recognised on tax loss carryforwards and temporary differences relate primarily to Deutsche Post AG and members of its consolidated tax group. Effects from deferred tax assets of foreign companies not recognised on tax loss carryforwards and temporary differences relate primarily to the Americas region.

Effects from deferred tax assets not recognised amounting to €585 million (previous year: €122 million) were due to the reversal of a write-down of deferred tax assets recognised in a prior period. The income tax expense was reduced by an amount of €17 million (previous year: €51 million) as a result of the utilisation of tax losses not previously reflected in the financial statements.

A deferred tax asset in the amount of €332 million was recognised in the balance sheet as, based on tax planning, realisation of the tax asset is probable, and losses of the current period are largely due to non-recurring items.

In financial year 2008, German Group companies were not affected by tax rate changes. In the previous year, such changes resulted from the 2008 business tax reform. The change in the tax rate in some foreign tax jurisdictions did not lead to any significant effects.

The effective income tax expense includes prior-period tax expenses from German and foreign companies in the amount of €45 million (previous year: €9 million).