14.

INCOME TAXES


Years ended December 31	2017			2016
Current income tax expense	$	196		$	125
Deferred income tax recovery		(661	)		(65	)

Income tax (recovery) expense	$	(465	)	$	60

Income tax (recovery) expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before taxes. These differences result from the following items:


Years ended December 31	2017			2016
Earnings before taxes	$	193		$	222
Canadian federal and provincial income tax rates		25	%		25	%

Income tax expense based on Canadian federal and provincial income tax rates		48			56
(Decrease) increase attributable to:
Changes in recognition of deferred tax assets		38			(47	)
Effects of different foreign statutory tax rates on earnings of subsidiaries		25			(58	)
Non-deductible expenditures		16			42
Mining taxes		10			35
Foreign exchange impact on tax bases of assets, liabilities, and losses		(8	)		189
Mexican inflation on tax values		(30	)		(14	)
Assets sold and assets held for sale (note 8)		(36	)		29
Non-taxable portion of net earnings from associates		(47	)		(43	)
Other impacts of foreign exchange ⁽¹⁾		(116	)		(128	)
Argentinian tax reform ⁽²⁾		(156	)		—
Impairment of mining interests (note 21)		(206	)		—
Other		(3	)		(1	)

	$	(465	)	$	60

⁽¹⁾	Other impacts of foreign exchange include the currency translation effects of local currency current taxes receivable and payable, the tax impact of local currency foreign exchange gains or losses and the non-taxable or non-deductible US dollar currency foreign exchange gains or losses.

⁽²⁾

In December 2017, Argentina enacted corporate tax changes which included a reduction in the corporate tax rate from 35% to 30% for 2018 and 2019, with a further reduction to 25% for 2020 and thereafter. Concurrently, a dividend distribution tax was introduced which charges an effective tax of 5% and 10% on dividend distributions for 2018 and 2019, and 2020 and thereafter, respectively. The Argentine tax rate reduction resulted in a deferred tax recovery of $156 million in 2017.

The significant components of deferred income tax assets and liabilities were as follows:


	At December 31 2017			At December 31 2016
Deferred income tax assets ^(a)
Operating loss carryforwards
Argentina	$	144		$	199
Canada		141			129
Mexico		3			25
Chile		5			5
Other		—			1

		293			359

Deductible temporary differences relating to:
Reclamation and closure cost obligations		144			147
Mining interests		131			87
Other		112			79

		387			313
Investment tax credits		89			86

Total deferred income tax assets		769			758

Deferred income tax liabilities
Taxable temporary differences relating to:
Mining interests		(3,636	)		(4,255	)
Other		(84	)		(112	)

Total deferred income tax liabilities		(3,720	)		(4,367	)

Deferred income tax liabilities, net		(2,951	)		(3,609	)

Balance sheet presentation
Deferred income taxes assets		112			49
Deferred income taxes liabilities		(3,063	)		(3,658	)

Deferred income tax liabilities, net	$	(2,951	)	$	(3,609	)

(a)

The Company believes that it is probable that the results of future operations will generate sufficient taxable income to realize the above noted deferred income tax assets. The Company recognized $109 million (2016 – $43 million) in deferred tax assets that were in excess of taxable temporary differences but are supported by expected future taxable earnings.

Deferred tax assets that have not been recognized as part of the total above were as follows:


	At December 31 2017		At December 31 2016
Operating loss carryforwards	$	37	$	78
Deductible temporary differences relating to:
Non-operating losses		111		63
Mining interests		—		17
Other		6		31

	$	154	$	189