Note 14 - Income tax
14.1 ANALYSIS OF INCOME TAX
Income tax breaks down as follows:
| 2020 | 2019 | ||
| Current taxes | (32) | (47) | |
| Deferred taxes | 63 | (8) | |
| Total | 31 | (55) | |
In 2020, the Group recorded income tax expense of €31 million, a €86 million decrease on the 2019 figure, chiefly reflecting:
- €23 million in recognised tax loss carryforwards relating to US federal taxes, owing to the slump in trading and the disposal of Lagardère Sports Inc.;
- €15 million in reversals of deferred tax liabilities in connection with the €55 million impairment loss recognised by Lagardère Travel Retail on Rome airport concession agreements;
- €15 million relating to the reduction in current income tax expense due to the slump in trading, mainly in Italy and Spain;
- €14 million in deferred tax assets arising on net finance costs carried forward and tax losses carried forward in the United States;
- €11 million relating to the net positive impact of changes in deferred taxes on provisions and on the amortisation of acquisitionrelated intangible assets.
14.2 TAX PROOF
The following table reconciles income tax reported in the income statement to the theoretical income tax expense for 2020 and 2019:
| 2020 | 2019 | ||
| Profit (loss) before tax | (699) | 273 | |
| (-) Income (loss) from equity-accounted companies | 58 | (6) | |
| Profit of fully consolidated companies before tax | (641) | 267 | |
| Theoretical tax expense(*) | 205 | (92) | |
| Effect on theoretical tax expense of: | |||
| Different tax bases for capital gains and losses (**) | 5 | 40 | |
| Different tax bases for impairment losses on goodwill and other intangible assets | (24) | (10) | |
| Different tax rates on earnings of foreign subsidiaries | (37) | 13 | |
| Tax credits and tax incentives | 7 | 31 | |
| Limitation on deferred taxes | (16) | (3) | |
| Effect of changes in tax rates on deferred taxes | - | (3) | |
| Tax loss carryforwards used (recognised) in the year(***) | (107) | (8) | |
| Impact of deferred tax asset recognised on tax loss carryforwards | - | - | |
| Impact of discontinued operations | - | 8 | |
| Permanent differences and other items | (2) | (3) | |
| Effective income tax expense | 31 | (55) | |
(*) Calculated at the French standard rate (32.02% in 2020 and 34.43% in 2019).
(**) Differences between disposal gains for tax purposes and book disposal gains.
(***) Tax losses for which no deferred tax assets were recognised.
14.3 DEFERRED TAXES RECOGNISED IN THE BALANCE SHEET
Deferred taxes recognised at 31 December 2020 and 2019 concerned the following assets and liabilities:
| 31 Dec. 2020 | 31 Dec. 2019 | ||
| Intangible assets | (224) | (252) | |
| Property, plant and equipment | (19) | (12) | |
| Non-current financial assets | - | (4) | |
| Inventories | 15 | 18 | |
| Provisions for pension benefit obligations | 22 | 22 | |
| Right-of-use assets and lease liabilities | 78 | 55 | |
| Other provisions | 72 | 68 | |
| Other working capital items | 99 | 118 | |
| Temporary differences (gross amount) | 43 | 13 | |
| Write-down of deferred tax assets | (181) | (132) | |
| Temporary differences (net amount) | (138) | (119) | |
| Tax loss carryforwards | 124 | 51 | |
| Tax credits | - | - | |
| Net deferred tax asset (liability) | (14) | (68) | |
| Deferred tax assets | 239 | 210 | |
| Deferred tax liabilities | (253) | (278) | |
At 31 December 2020, the Group also has tax loss carryforwards arising in the French tax group headed by Lagardère SCA representing more than €285 million (tax base).
14.4 CHANGES IN DEFERRED TAXES
| 2020 | 2019 | ||
| Net deferred tax asset (liability) at 1 January | (68) | (29) | |
| Income tax expense recognised in the income statement | 63 | (8) | |
| Deferred tax recognised directly in equity | (5) | 8 | |
| Reclassification as assets held for sale and associated liabilities | - | - | |
| Net cash from (used in) discontinued operations | - | (4) | |
| Effect of change in scope of consolidation and exchange rates | (4) | (35) | |
| Net deferred tax asset (liability) at 31 December | (14) | (68) | |
The negative €4 million impact of changes in scope of consolidation and exchange rates in 2020 is mainly attributable to the disposals of Lagardère Sports and Lagardère Studios (see note 4.2).
Deferred taxes recognised directly in equity can be analysed as follows:
| 31 Dec. 2020 | 31 Dec. 2019 | ||
| Investments in non-consolidated companies | - | - | |
| Cash flow hedges | (5) | 1 | |
| Actuarial gains and losses on pensions and other post-employment benefit obligations | 21 | 24 | |
| Total | 16 | 25 | |