NOTES TO THE ANNUAL FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2007

       
« Note 20 Note 22 »
       
21.  TAXATION     
    2007  2006 
    R million  R million 
  21.1 Taxation in income statement     
Current  339  841 
– current year – South African normal taxation  332  488 
                    – Taxation on capital gain  –  350 
                    – Foreign taxation  8  5 
  340  843 
– previous year – South African normal taxation (1) (2)
Secondary taxation on companies  21  27 
– current  21  13 
– deferred  –  14 
     
Deferred – current year  60  (8)
             – previous year  (17) 6 
             – rate change  –  (9)
  403  857 
21.2 Reconciliation of effective tax rate of the Company and its     
        subsidiaries with standard rate  %  % 
Effective tax rate  26.4  16.8 
Reduction/(increase) in standard rate as a result of:     
   Exempt dividend income  3.0  2.3 
   Non-taxable capital profit  –  10.6 
   Other non-taxable income/(expenses) 0.4  0.1 
   Foreign taxation  (0.5) (0.3)
   Taxation in respect of previous years  1.1  (0.2)
   Rate change  –  0.2 
   Secondary tax on companies  (1.4) (0.5)
Standard rate  29.0  29.0 
  21.3 Deferred taxation     
  Deferred taxation liability  1 205  790 
     Property, plant and equipment  378  322 
     Intangibles  16  14 
     Inventories  84  75 
     Provisions  (44) (67)
     Biological agricultural assets  34  24 
     Other  (1) 5 
     Investments (accounted for directly in equity) 738  417 
  Deferred tax asset (124) (90)
  Property, plant and equipment  (44) (12)
  Intangibles  –  (3)
  Inventories  –  (24)
  Provisions  (20) (24)
  Other  (11) (10)
  Tax losses  (49) (17)
  Net deferred taxation 1 081  700 
  The movement between balances of deferred taxation at the     
     beginning and end of the year can be analysed as follows:     
     Beginning of the year  700  319 
     As per income statement  43  3 
     Direct in equity  338  310 
     Businesses acquired  –  (3)
     Medi-Clinic*  –  71 
    1 081  700 
 

* Since 1 January 2006, Medi-Clinic has been accounted for as an associated company, while it was consolidated previously.

No deferred tax is provided on temporary differences relating to investments in subsidiary companies and joint ventures as Remgro controls the dividend policy of these companies and consequently also controls the reversal of the temporary differences.

The carrying values of investments in associated companies are mainly recovered through dividends. As no taxable temporary differences exist, no deferred tax is provided.

Deferred taxation on the fair value adjustments of investments available-for-sale is provided at 14.5%, as there is a possibility that these investments will be realised in the medium term.
       
  21.4 Tax losses     
  Estimated tax losses available for set-off against future taxable income  245  60 
  Utilised to create deferred tax asset  (168) (60)
    77  – 
  21.5 Secondary taxation on companies (STC)    
  The STC credits on 31 March, which could be set off against future     
     dividend payments, amount to     
     – The Company  172  596 
     – Subsidiary companies  1 356  1 223 
  Unutilised STC credits 1 528  1 819 
 

A foreign wholly owned subsidiary company of Remgro has reserves available that will give rise to additional STC credits of R1 538 million (2006: R1 471 million) when declared as dividends to its South African holding company.

Remgro’s history of dividends received compared to ordinary dividends paid suggests increasing STC credits over time. It is therefore unlikely that Remgro’s STC credits will be utilised against ordinary dividends paid in the foreseeable future, and consequently no deferred tax asset has been created for the Company’s unutilised STC credits.