Income Taxes

12 Months Ended

Dec. 31, 2021

The provision for income tax was as follows:


Expense (recovery)	2021		2020		2019
Current corporate income tax – North America	$	1,841	$	(245)	$	354
Current corporate income tax – North Sea	7		(4)		112
Current corporate income tax – Offshore Africa	21		17		44
Current PRT (1) – North Sea	(34)		(31)		(89)
Other taxes	13		6		13
Current income tax	1,848		(257)		434
Deferred corporate income tax	399		(181)		(895)
Deferred PRT – North Sea	—		—		1
Deferred income tax	399		(181)		(894)
Income tax	$	2,247	$	(438)	$	(460)

(1)Petroleum Revenue Tax.

The provision for income tax is different from the amount computed by applying the combined statutory Canadian federal and provincial income tax rates to earnings before taxes. The reasons for the difference are as follows:


	2021		2020		2019
Canadian statutory income tax rate	23.2%		24.1%		26.5%
Income tax provision at statutory rate	$	2,298	$	(211)	$	1,313
Effect on income taxes of:
UK PRT and other taxes	(21)		(25)		(76)
Impact of deductible UK PRT and other taxes on corporate income tax	11		11		32
Foreign and domestic tax rate differentials	(11)		(52)		(48)
Non-taxable portion of capital gains	(26)		(10)		(65)
Stock options exercised for common shares	98		(25)		47
Income tax rate and other legislative changes	—		—		(1,618)
Non-taxable gain on corporate acquisitions	(110)		(52)		—
Revisions arising from prior year tax filings	16		(62)		(41)
Change in unrecognized capital loss carryforward asset	(26)		(10)		(65)
Other	18		(2)		61
Income tax	$	2,247	$	(438)	$	(460)

The following table summarizes the temporary differences that give rise to the net deferred income tax liability:


	2021		2020
Deferred income tax liabilities
Property, plant and equipment and exploration and evaluation assets	$	12,254	$	11,922
Lease assets	349		380


Investments	35		14
Investment in North West Redwater Partnership	850		767
Unrealized risk management activities	12		—
Unrealized foreign exchange gain on long-term debt	14		—
Other	78		8
	13,592		13,091
Deferred income tax assets
Asset retirement obligations	(1,719)		(1,495)
Lease liabilities	(363)		(388)
Share-based compensation	(22)		(12)
Loss carryforwards	(1,268)		(1,032)
Unrealized foreign exchange loss on long-term debt	—		(20)



	(3,372)		(2,947)
Net deferred income tax liability	$	10,220	$	10,144

Movements in deferred tax assets and liabilities recognized in net earnings during the year were as follows:


	2021		2020		2019
Property, plant and equipment and exploration and evaluation assets	$	184	$	(158)	$	(775)
Lease assets	(30)		(11)		414
Unrealized foreign exchange on long-term debt	34		29		55
Unrealized risk management activities	19		(8)		(14)
Asset retirement obligations	(213)		(13)		(317)
Lease liabilities	25		6		(418)
Share-based compensation	(10)		4		(11)
Loss carryforwards	202		(182)		170
Investments	21		(22)		(10)
Investment in North West Redwater Partnership	83		174		179
Deferred PRT	—		—		1

Other	84		—		(168)
	$	399	$	(181)	$	(894)

The following table summarizes the movements of the net deferred income tax liability during the year:


	2021		2020		2019
Balance – beginning of year	$	10,144	$	10,539	$	11,451
Deferred income tax expense (recovery)	399		(181)		(894)
Deferred income tax expense included in other comprehensive loss	1		—		8
Foreign exchange adjustments	(2)		(3)		(26)
Business combinations (note 7)	(322)		(211)		—
Balance – end of year	$	10,220	$	10,144	$	10,539

Current income taxes recognized in each operating segment will vary depending upon available income tax deductions related to the nature, timing and amount of capital expenditures incurred in any particular year.

During 2019, the Government of Alberta enacted legislation that decreased the provincial corporate income tax rate from 12% to 11% effective July 2019, with a further 1% rate reduction every year on January 1 until the provincial corporate income tax rate is 8% on January 1, 2022. As a result of this corporate income tax rate reduction, the Company's deferred corporate income tax liability decreased by $1,618 million for the year ended December 31, 2019. During 2020, the Government of Alberta substantively enacted legislation to accelerate this reduction, lowering the corporate tax rate from 10% to 8%, effective July 1, 2020. This acceleration did not have a significant impact on the Company's deferred corporate income tax liability at December 31, 2020.

The Company files income tax returns in the various jurisdictions in which it operates. These tax returns are subject to periodic examinations in the normal course by the applicable tax authorities. The tax returns as prepared may include filing positions that could be subject to differing interpretations of applicable tax laws and regulations, which may take several years to resolve. The Company does not believe the ultimate resolution of these matters will have a material impact upon the Company’s reported results of operations, financial position or liquidity.

Deferred income tax assets are recognized for temporary differences to the extent that the realization of the related tax benefit through future taxable profits is probable. The Company has not recognized deferred income tax assets with respect to taxable capital loss carryforwards in excess of $1,000 million in North America, which can be carried forward indefinitely and only applied against future taxable capital gains. In addition, the Company has not recognized deferred income tax assets related to North American tax pools of approximately $1,050 million, which can only be claimed against income from certain oil and gas properties.

Deferred income tax liabilities have not been recognized on the unremitted net earnings of wholly controlled subsidiaries. The Company is able to control the timing and amount of distributions and no taxes are payable on distributions from these subsidiaries provided that the distributions remain within certain limits.