Page 27 - BHP Economic Contribution Report 2020

Effective tax rate What is your adjusted effective tax rate? Our contribution
What is your effective tax rate and how is it calculated? We also report adjusted effective tax rates, which exclude the influence
of exchange rate movements and exceptional items, because we
The effective tax rate is the amount of tax expense attributable believe this gives a clearer view of our ongoing contribution and how
to a year as a proportion of profit before tax. it changes over time. Our global adjusted effective tax rate for FY2020
Two measures of effective tax rate are commonly used: was 33.2 per cent. It is reconciled to the statutory effective tax rate
1. Statutory effective tax rate – calculated as total taxation expense shown below.
divided by accounting profit. 2020
2. Corporate effective tax rate – calculated as total income tax expense Profit before Income tax Our approach
divided by accounting profit. This excludes the impact of royalty- taxation US$M expense US$M %
related taxation (such as Petroleum Resource Rent Tax in Australia Statutory effective tax rate 13,510 (4,774) 35.3
and Specific Tax on Mining Activities in Chile). Adjusted for:
Outcomes for FY2020 for our key jurisdictions for these effective tax rate Exchange rate movements – 20
measures are shown below. These rates do not include royalties, but do Exceptional items (1) 1,546 (241)
include the impact of any profits and taxation expenses that are treated Adjusted effective tax rate 15,056 (4,995) 33.2
as ‘exceptional’ items for the purposes of our Financial Statements.
(1) Refer to note 3 ‘Exceptional items’ in section 5 of the Annual Report 2020.
Corporate effective Statutory effective
tax rate tax rate Adjusted e ective tax rate and statutory e ective tax rate
Global % 34.8 35.3 50 Our payments
Australia % 31.1 31.6 47.5%
Chile % 43.9 46.8
United States % (1) 41.8 52.7 40 39.7% 36.7%
35.8% 35.3%
(1) The United States was in a net loss position which has a distortive impact on the 31.4% 36.0%
effective tax rate. 34.0% 33.2%
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10 Additional information

0.0%
0
FY2016 FY2017 FY2018 FY2019 FY2020
– Adjusted ETR
– Statutory ETR

The Group’s statutory effective tax rate for FY2016 presents as nil
because we recognised a total taxation benefit of US$1.1 billion
(including government imposed royalty-related taxation calculated
by reference to profits) and a loss before taxation for the period
of US$7.3 billion.
Why is your effective tax rate not the same as the corporate
tax rate?
The tax rate (from which the effective tax rate is derived) is different in
each country in which we operate. That tax rate applies to the taxable
profits derived in that country and any deductions, allowances, incentives
or other adjustments unique to that country. As a result, our global
effective tax rate will not be the same as the corporate tax rate in any
particular country.

BHP Economic Contribution Report 2020 25