In order to compare the taxation practices of Egyptian and non-Egyptian firms, we will be analyzing the following list of the companies, all of which are from the telecommunication industry. Below is the list of Egyptian and Non-Egyptian firms, which we analyze for the purpose of comparing their tax reporting practices:
- Telecom Egypt
- AT& T
Founded in the year, 1988, Mobinil is one of the largest telecom companies in Egypt. As for the tax reporting by the company, during 2012, the company reported current tax expense of +LE 1.147 Million and deferred tax expense of -LE 36.800 Million, thus accounting for total income tax expense of –LE 35.62 Million in its income statement. The company ended the year with a net loss of –LE 165.44 Million and disclosed the deferred tax liabilities of LE 974.492 under non-current liabilities portion of its balance sheet.
The deferred tax liability has been raised on account of net deferred tax assets or liabilities from underlined assets and liabilities in the balance sheet as follows:
ii) Telecom Egypt:
The monopoly holder fixed landline telephone services in Egypt, during 2013, Telecom Egypt, has raised accounted for the current tax expense of LE 717.858 Million and of the total deferred tax assets of LE 324.55 Million, an amount of LE 74.538 Million has been charged to the income statement of the current year, thus accounting for the total income tax expense to be LE 792.396 Million. As for the deferred tax assets, the company has reported an amount of LE 324.55 Million under the long term assets portion of the balance sheet.
The amount of LE 324.55 Million worth of deferred tax assets has been raised on account of net deferred tax assets or liabilities from underlined assets and liabilities in the balance sheet as follows:
Known to be the first telecommunication company to provide 3.5 G network services in Egypt, Etisalat is one of the leading telecom operators in the country. The company reported current tax expense of AED 496.90 Million and deferred tax expense of AED 151.74 Million during 2013 as part of its consolidated income statement. The company also reported net deferred tax liabilities of AED 1506.797 Million as part of non-current liabilities on its balance sheet.
Founded in the year 1885, with the name American Telephone and Telegraph Company, AT& T is the largest provider of mobile telephone and fixed telephone in the United States. During 2013, the company reported the tax expense of $9224 Million in its income statement and an amount of $36308 Million to report the deferred tax liabilities under the Non-Current Liabilities and $1199 Million of deferred tax assets under the current assets portion of the Balance Sheet.
Sprint Corporation, which is popularly known as Sprint, is the third largest telecommunication company in the United States. Founded in the year 1889, the company today serves more than 54.6 million customers. During 2012, the company reported income tax expense of $154 Million in its income statement and deferred tax assets and deferred tax liabilities of $1 million and $7047 million, respectively.
iii) Verizon :
Verizon Communication, during 2012, reported tax benefit of $660 Million in its income statement abd reported net deferred tax liability of $22249 Million. Below is the detail of deferred tax assets and liabilities of the company:
In general, below are the differences relating to tax disclosures among the Egyptian Firm and Non-Egyptian Firms:
i) Separate Bifurcation of Income Tax expense on the income statement for Egyptian Firms:
Egyptian firms provided a bifurcation of income tax expense on the income statement as current tax expense+ relevant adjustment of deferred tax assets or liabilities. On the contrary, the US based firms, which are following US GAAP Accounting standards, directly reported the income tax expense on their income statement while the adjustment of current tax expense and deferred tax assets or liabilities was disclosed only under the notes to the financial statements.
ii) Balance Sheet Classification:
Another important difference for the classification is that Egyptian firms which are following IFRS standards, classifies all the deferred tax assets and liabilities as non-current, regardless of what asset or liability generated the difference. In contrast, non-Egyptian firms, which follows US GAAP, classifies deferred tax assets and liabilities on the basis as what generated the temporary difference.
iii) Tax Basis Difference
For Non-Egyptian companies, Tax basis is a question of fact under the tax law. On the other hand, Egyptian companies which follows IFRS standards, determines tax basis on the basis of the amount deductible for tax purposes. Under IFRS, The determination of the tax basis is influenced by the way in which the entity intends to settle or recover the carrying amount.
iv) Use of Valuation Allowance:
Non-Egyptian entities records a full deferred tax assets and then reduces the recorded asset by valuation allowance if realization of asset is not ‘’more likely than not’’. On the contrary, Egyptian entities records deferred tax assets if there is more than 50% probability that the asset will be realized.
AT&T . "Annual Report." 2013.
Etisalat. "Annual Report." 2013.
Mobinil. "Annual Report 2012." Annual Report, 2012.
Sprint Corporation. "SEC 10-K Filing." 2012.
Telecom Egypt. "Annual Report." Annual Report, 2013.