Adjustments in respect of prior years refers to amounts changing due to the filing of tax returns and assessments from government authorities.

(c) Changes in deferred tax assets and liabilities:

		Year ended Dec. 31, 2020			Year ended Dec. 31, 2019
Net deferred tax liability balance, beginning of year	$	(167,882	)	$	(308,577	)
Deferred tax recovery		43,236			144,865
OCI transactions		(759	)		1,878
Foreign currency translation on the deferred tax liability		(2,129	)		(6,048	)
Net deferred tax liability balance, end of year	$	(127,534	)	$	(167,882	)

(d) Reconciliation to statutory tax rate:

As a result of its mining operations, the Company is subject to both income and mining taxes. Generally, most expenditures incurred are deductible in computing income tax, whereas mining tax legislation, although based on a measure of profitability from carrying on mining operations, is more restrictive in respect of the deductions permitted in computing income subject to mining tax. These restrictions include costs unrelated to mining operations as well as deductions for financing expenses, such as interest and royalties. In addition, income unrelated to carrying on mining operations is not subject to mining tax.

A reconciliation between tax expense and the product of accounting profit multiplied by the Company's statutory income tax rate for the years ended December 31, 2020 and 2019 is as follows:

		Year ended December 31,
		2020			2019
Statutory tax rate		26.3	%		27.0	%

Tax recovery at statutory rate	$	(47,047	)	$	(122,246	)
Effect of:
Deductions related to mining taxes		(1,369	)		(1,493	)
Adjusted income taxes		(48,416	)		(123,739	)
Mining tax expense (recovery)		1,291			(6,674	)
		(47,125	)		(130,413	)

Permanent differences related to:
Capital items		(160	)		3,270
Other income tax permanent differences		(1,165	)		1,747
Impact of remeasurement on decommissioning liability		7,094			(12,018	)
Temporary income tax differences not recognized		(1,827	)		(351	)
Other temporary income tax differences not recognized		2,927			2,323
Non-deductible impairment on UCM receivable		—			7,041
Withholding tax on dividends		—			6,826
Impact related to differences in tax rates in foreign operations		5,534			20,338
Impact of changes to statutory tax rates		2,412			(259	)
Foreign exchange on non-monetary items		(3,628	)		(6,633	)
Impact related to tax assessments and tax return amendments		1,433			(824	)
Tax recovery	$	(34,505	)	$	(108,953	)

A decrease in the statutory tax rate in 2020 mainly reflects a reduction in the Canadian statutory tax rate which is the result of the changes to the relevant provincial allocation factors based on income earned and expenses incurred in different Canadian jurisdictions.

(e) Income tax effect of temporary differences - recognized:

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2020 and 2019 are as follows:

		Balance sheet						Income Statement
		Dec. 31, 2020			Dec. 31, 2019			Dec. 31, 2020			Dec. 31, 2019
Deferred income tax (liability) asset/expense (recovery)
Property, plant and equipment	$	(88,368	)	$	(96,841	)	$	(8,473	)	$	13,434
Pension obligation		9,467			11,332			1,294			(1,115	)
Other employee benefits		25,687			16,837			(8,850	)		(3,349	)
Decommissioning and restoration obligation		37,902			41,208			3,307			(33,391	)
Non-capital losses		110,374			90,446			(19,928	)		(17,976	)
Share issuance and debt cost		8,972			6,540			(2,768	)		4,361
Embedded derivative (prepayment option)		(13,137	)		(694	)		12,443			245
Deferred revenue		(809	)		(112	)		697			(12,839	)
Other		3,982			1,234			(4,516	)		(7,755	)
Deferred income tax asset / expense (recovery)		94,070			69,950			(26,794	)		(58,385	)
Deferred income tax liability (asset)/ (recovery) expense
Property, plant and equipment		292,858			259,145			33,713			(79,892	)
Other employee benefits		203			(80	)		(176	)		(320	)
Asset retirement obligations		(1,588	)		(833	)		(756	)		85
Non-capital losses		(78,607	)		(28,643	)		(49,965	)		(1,269	)
Other		7,702			3,629			4,073			7,302
Deferred income tax liability/ expense (recovery)		220,568			233,218			(13,111	)		(74,094	)
Deferred income tax liability/ expense (recovery)	$	(126,498	)	$	(163,268	)	$	(39,905	)	$	(132,479	)

The above reconciling items are disclosed at the tax rates that apply in the jurisdiction where they have arisen.

(f) Income tax temporary differences - not recognized:

The Company has not recognized a deferred tax asset in respect of the following deductible income tax temporary differences:

		Dec. 31, 2020		Dec. 31, 2019
Property, plant and equipment	$	46,718	$	33,269
Capital losses		166,227		159,545
Other employee benefits		51,226		68,866
Asset retirement obligations		193,898		146,679
Non-capital losses		115,902		122,979
Temporary differences not recognized	$	573,971	$	531,338

The deductible temporary differences excluding non-capital losses do not expire under current tax legislation.

The Canadian non-capital losses were incurred between 2006 and 2020 and expire between 2026 and 2040. Hudbay incurred United States net operating losses between 2004 and 2020 which have a twenty year carry forward period. Peruvian net operating losses were incurred in 2020 which have a four year carry forward period.

(g) Mining tax effect of temporary differences:

The tax effects of temporary differences that give rise to significant portions of the deferred mining tax assets and liabilities at December 31, 2020 and 2019 are as follows:

		Dec. 31, 2020			Dec. 31, 2019
Canada
Property, plant and equipment	$	7,829		$	5,095
		Dec. 31, 2020			Dec. 31, 2019
Peru
Property, plant and equipment	$	(8,865	)	$	(9,710	)

For the year ended December 31, 2020, Hudbay had unrecognized deferred mining tax assets of approximately $7,544 (December 31, 2019 - $5,361).

(h) Unrecognized taxable temporary differences associated with investments:

There are no taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, for which a deferred tax liability has not been recognized.

(i) Taxes receivable/payable:

The timing of payments results in significant variances in period-to-period comparisons of the tax receivable and tax payable balances.

(j) Other disclosure:

The tax rules and regulations applicable to mining companies are highly complex and subject to interpretation. The Company may be subject in the future to a review of its historic income and other tax filings and, in connection with such reviews, disputes can arise with tax authorities over the interpretation or application of certain tax rules and regulations in respect of the Company's business. These reviews may alter the timing or amount of taxable income or deductions. The amount ultimately reassessed upon resolution of issues raised may differ from the amount accrued.