to download Telecom Italia Annual Report 2011 - Company Reporting

Income tax expense
The income tax expense for the years ended December 31, 2011 and 2010 is detailed as follows.
(thousands of euros) 2011 2010
IRAP taxes for current year 331,623 348,473
IRES taxes for current year 786,359 793,881
Expenses/(income) from tax consolidation 29,965 27,375
Current taxes of prior years (93,113) (83,784)
Total current taxes 1,054,834 1,085,945
Deferred income taxes 94,044 9,293
Deferred taxes of prior years 44,128 2,163
Total deferred taxes 138,172 11,456
Total income taxes for the year 1,193,006 1,097,401
The IRES tax rate was established by Law 244 of December 24, 2007 at 27.5%, effective
January 1, 2008, while the IRAP tax rate was set at 3.9%.
The positive impact from current taxes of prior years (93,113 thousand euros) is due to lower taxes
arising when the tax return was prepared as compared with the estimate recorded in the 2010 financial
statements owing to a prudent interpretation of the tax laws in effect at that time; such effect is partly
offset by higher deferred taxes of prior years (44,128 thousand euros).
The reconciliation between the theoretical tax charge, calculated on the basis of the IRES tax rate in
effect at December 31, 2011 (27.5%), and the effective tax charge in the separate financial statements
is as follows:
(thousands of euros) 2011 2010
Profit (loss) before tax (2,378,250) 4,609,982
Taxes calculated at the theoretical tax rate (654,019) 1,267,745
Income tax effect on increases (decreases) in variations:
dividends recognized in income (68,132) (648,014)
non-deductible depreciation, amortization and impairments 1,483,203 11,725
non-deductible impairments and losses on investments 120,868 154,456
non-taxable gains on investments and other income (12,600) -
non-deductible costs 11,490 8,405
other (7,071) (32,910)
Effective income tax recognized in income statement, excluding IRAP 873,739 761,408
IRAP 319,267 335,993
Total effective income tax recognized in the separate income statement 1,193,006 1,097,401
For a better understanding of the above reconciliation, the Regional Income Tax (IRAP) tax has been
shown separately so as to avoid any distorting effect arising from the fact that this tax is calculated on a
tax basis other than pre-tax profit.
Telecom Italia S.p.A. Separate Financial Statements Note 9 – Income taxes 344