Page 26 - BHP Economic Contribution Report 2020

Tax and our FY2020 Financial Statements

Below are some commonly asked questions to assist with better How do the numbers reported here reconcile to the tax
understanding this Report and its link to our Financial Statements. expense in your financial report?
Tax expense The income tax and royalty-related taxation paid reported in this Report
is included in section 5.1.4 Consolidated Cash Flow Statement in the
Why is the tax expense in your Financial Statements different Annual Report 2020, presented as net income tax and royalty-related
to the amount of tax paid you disclose in this Report? taxation refunded of US$48 million and net income tax and royalty-
The numbers are different because they are calculated at different times related taxation paid of US$5,992 million. These also reconcile to
for different purposes. the tax expense, presented on an accrual basis, in note 6 ‘Income tax
expense’ in section 5 in the Annual Report 2020, as shown below.
The income tax expense recorded in our Financial Statements reflects
the impact on our financial position at the end of the financial year. Set out in the table below is a summary breakdown of the deferred tax
It is designed to give shareholders an indication of the amount of tax expense arising from differences between accounting and tax treatments
the Group expects to pay for the activities undertaken during that as shown in note 13 ‘Deferred tax balances’ in section 5 in the Annual
financial year, so they can assess the impact tax may have on the Report 2020.
financial position of the Group. For a number of reasons, this number Deferred tax
does not represent the actual cash tax paid during that financial year. expense
For example, cash tax paid during that financial year may include Depreciation 1,394
payments or refunds relating to activities for a prior financial year, Exploration expenditure 51
but may exclude final payments or refunds that relate to activities for Employee benefits (38)
that financial year but which occur after the end of the financial year. Closure and rehabilitation (334)
Additionally, the reporting of revenues or expenses in our Financial Resource rent tax (119)
Statements may be different to their impact on taxable income reported Other provisions (268)
in tax returns. For example, a piece of equipment may be depreciated for Deferred income 33
accounting purposes over a certain number of years, but be deductible Deferred charges (132)
for tax purposes over a different period (whether shorter or longer). Investments, including foreign tax credits (77)
These differences are commonly known as ‘deferred taxation’. Foreign exchange gains and losses (18)
Income tax expense may also be impacted by items that don’t result Tax losses (148)
in an outlay of cash, such as taxes paid in-kind. Lease liability (793)
Other 114
Total deferred tax expense charged/(credited) (335)

Reconciliation of taxes paid to tax expense
7000
US$M
5,944 (1,609)
6,000
656 118 5,109 (335)
5,000 4,774
4,000
3,000

2,000
1,000

0
Corporate income tax Tax payments Tax payments in Other Current tax Deferred tax arising Total tax
and royalty-related from prior periods respect of FY2020 (includes taxes expense from di erences expense (current
taxes that have that were made that will be made in paid in-kind) between accounting and deferred
been paid and in FY2020 (Opening subsequent periods and tax treatments tax expense)
received in FY2020 income tax and (Closing income tax
on a cash basis royalty-related and royalty-related
tax payable) tax payable)

24 BHP Economic Contribution Report 2020