Income Taxes

12 Months Ended

Dec. 31, 2020

29. INCOME TAXES

Components of Income Tax Expense


	2020		2019
Current tax expense (recovery)
Recognized in profit or loss in current year	$	99,013	$	95,219
Adjustments recognized in the current year with respect to prior years	(658)		(3,090)
	98,355		92,129
Deferred tax expense (recovery)
Deferred tax recovery recognized in the current year	14,667		(13,079)
Adjustments recognized in the current year with respect to prior years	433		(5,003)

Benefit from previously unrecognized losses, and other temporary differences	(42,379)		—
Decrease in deferred tax liabilities due to tax impact of NRV charge to inventory	4,481		(2,779)
	(22,798)		(20,861)
Income tax expense	$	75,557	$	71,268

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes. These differences result from the items shown on the following table, which results in an effective tax rate that varies considerably from the comparable period. The main factors that affected the effective tax rate for the year ended December 31, 2020 and the comparable period of 2019 were foreign exchange fluctuations, changes in non-recognition of certain deferred tax assets (most notably the realization of deferred tax benefits associated with the La Arena, Timmins West, and Bell Creek mines in Q4 2020), mining taxes paid, and withholding taxes on payments from foreign subsidiaries. The Company expects that these and other factors will continue to cause volatility in effective tax rates in the future.

Reconciliation of Effective Income Tax Rate


	2020			2019
Earnings before taxes and non-controlling interest	$	252,012		$	182,512
Statutory Canadian income tax rate	27.00		%	27.00		%
Income tax expense based on above rates	$	68,043		$	49,278
Increase (decrease) due to:
Non-deductible expenditures	9,915			7,271
Foreign tax rate differences	16,179			2,507
Change in net deferred tax assets not recognized:
- Argentina exploration expenditures	(3,485)			3,117
- Other deferred tax assets	(61,280)			(11,211)

Effect of other taxes paid (mining and withholding)	22,545			21,307
Effect of foreign exchange on tax expense	18,598			(7,651)
Non-taxable impact of foreign exchange	(3,000)			4,158
Change in non-deductible portion of reclamation liabilities	8,605			8,207
Change in current tax expense estimated for prior years	—			(6,694)
Other	(563)			979
Income tax expense	$	75,557		$	71,268
Effective income tax rate	29.98		%	39.05		%

Deferred tax assets and liabilities

The following is the analysis of the deferred tax assets (liabilities) presented in the consolidated financial statements:


	2020		2019
Net deferred tax liability, beginning of year	$	(140,361)	$	(136,575)
Initial deferred tax liability associated with the Tahoe Acquisition	—		(24,080)
Recognized in net earnings in the year	22,798		20,861
Reduction due to Mexican de-consolidation payments applied to current tax	—		(705)
Other	102		138
Net deferred liability, end of year	(117,461)		(140,361)
Deferred tax assets	57,850		36,447
Deferred tax liabilities	(175,311)		(176,808)
Net deferred tax liability	$	(117,461)	$	(140,361)

Components of deferred tax assets and liabilities

The deferred tax assets (liabilities) are comprised of the various temporary differences, as detailed below:


	2020		2019(1)
Deferred tax assets (liabilities) arising from:
Closure and decommissioning costs	$	26,482	$	16,002
Tax losses, resource pools and mining tax credits	140,608		122,187
Deductible Mexican mining taxes	3,286		2,701

Accounts payable and accrued liabilities	17,737		17,974
Trade and other receivables	13,290		17,194
Provision for doubtful debts and inventory adjustments	(21,354)		(7,145)
Short-term investments	(15,649)		(15,295)
Mineral properties, plant, and equipment	(274,483)		(278,707)
Estimated sales provisions	(14,028)		(23,026)
Other temporary differences and provisions	6,650		7,754
Net deferred tax liability	$	(117,461)	$	(140,361)

(1)Recast comparative deferred tax assets and liabilities to provide consistency with current presentation.

At December 31, 2020, the net deferred tax liability above included the deferred tax benefit of $140.6 million, which includes the benefits from tax losses ($43.8 million) and resource pools ($96.8 million). The increase in this deferred tax asset is mainly due to the Timmins and Bell Creek mine asset additions which were related to previously unbenefitted deductible resource pools, partially offset by losses utilized against taxable income earned. The losses will begin to expire after the 2024 year end, if unused.

At December 31, 2019, the net deferred tax liability above included the deferred tax benefit of $122.2 million, which includes the benefits from tax losses ($59.6 million) and resource pools ($62.6 million). The significant increase in these deferred tax assets from the prior year was primarily related to the Tahoe acquisition. The losses will begin to expire after the 2024 year end, if unused.

Unrecognized deductible temporary differences, unused tax losses and unused tax credits

Deductible temporary differences, unused tax losses and unused tax credits for which no deferred tax assets have been recognized are attributable to the following:


	2020		2019 (1)
Tax loss (revenue in nature)	$	284,626	$	202,181
Net tax loss (capital in nature)	32,378		34,646
Resource pools and other tax credits	48,773		260,413
Financing fees	2,003		2,849
Mineral properties, plant, and equipment	58,644		118,380
Closure and decommissioning costs	136,728		141,018
Exploration and other expenses not currently deductible	33,587		53,595
Intercompany debt	12,160		11,339
Doubtful debt and inventory	41,378		23,895
Payroll and vacation accruals	1,491		1,055
Other temporary differences	3,562		3,399
	$	655,330	$	852,770

(1)Recast comparative temporary differences, unused tax losses and unused tax credits to provide consistency with current presentation.

Included in the above amounts are operating losses, which if not utilized will expire as follows:


At December 31, 2020
	Canada		US		Peru		Mexico		Barbados		Argentina		Total
2021	$	—	$	317	$	26	$	—	$	8	$	1	$	352
2022	—		529		—		—		12		3		544
2023 – and after	269,001		11,746		314		2,406		183		80		283,730
Total tax losses	$	269,001	$	12,592	$	340	$	2,406	$	203	$	84	284,626


At December 31, 2019
	Canada		US		Peru		Mexico		Barbados		Argentina		Total
2020	$	—	$	79	$	2,110	$	—	$	7	$	1	$	2,197
2021	—		318		28		—		7		2		355
2022 – and after (1)	178,339		13,185		1,778		2,792		106		3,429		199,629
Total tax losses (1)	$	178,339	$	13,582	$	3,916	$	2,792	$	120	$	3,432	$	202,181

(1)Recast comparative operating losses to provide consistency with current presentation.

Taxable temporary differences associated with investment in subsidiaries

At December 31, 2020, taxable temporary differences of $275.7 million (2019 – $376.5 million) associated with the investments in subsidiaries have not been recognized as the Company is able to control the timing of the reversal of these differences which are not expected to reverse in the foreseeable future.