The effective current tax rate is higher than statutory tax rate mainly due to the losses incurredby certain subsidiaries and certain expenses not being deductible for tax purposes.
The Group is required to account for the impacts of deferred tax in accordance with MalaysianFinancial Reporting Standard 112:Income Taxes. Deferred tax expenses pertain to therecognition of deferred tax liabilities arising from temporary differences between the financialreporting and tax bases of specific assets and liabilities. Temporary differences emerge when thecarrying amount of an asset or liability and the timing of recognising these items for financialreporting varies from its tax basis.
The deferred tax expense presented primarily arises from the toll operation segments due to thefollowing factors:
(i)During the construction period of the concession assets, the finance cost was capitalisedinto concession assets and to be amortised over the remaining concession period.However, these finance cost was fully claimed as tax deductible expenses upon theinterest paid during the construction period. This creates the temporary differencebetween accounting base and tax base, which arises the deferred tax expense.
(ii)Unrecognition of deferred tax asset for accumulated unabsorbed business lossespursuant to Section 44(5F) of the Income tax Act 1967, as it is not probable that theexisting toll operation business would generate sufficient taxable profit within next 10-yearagainst which the deferred tax asset can be utilised.
(iii)The annual rate of industrial building allowance ("IBA") allowed to be claimed under theMalaysian tax authority is higher than the amortisation rate used in the accounting basis.This creates the temporary difference between accounting base and tax base,whicharises the deferred tax expense.