TNT's contingent tax liability reduces significantly

TNT N.V. today announced that as a result of further negotiations with various tax authorities, the estimated realistic range of its contingent tax liability has reduced from between €150 million and €550 million, as disclosed in TNT’s annual report for 2005, to between €100 million and €250 million. This range includes potential penalties and interest. Our tax positions have been and are supported by strong specialist external advice.

TNT renegotiates tax liability to cut oustanding bill
Birmingham Post, First, Sec. Business, p 22 04-21-2006
TNT’s outstanding tax bill is likely to be lower than first feared, the Dutch mail firm which has its UK head office in Warwickshire said yesterday.

After negotiations with unnamed tax authorities, the embattled company cut the range of its contingent tax liability to pounds 69 million to pounds 173 million from pounds 103 million to pounds 380 million estimated in February.

Earlier this month, the firm which has a site at Atherstone, revealed it planned to shed up to 1,100 jobs in the Netherlands.

A contingent liability is a potential obligation that may or may not be realised.

A TNT spokesman said the range could be further narrowed as talks with tax authorities continue.

“That’s a bit of speculation of course because it depends on individual cases,” the spokesman said.

TNT shares dropped sharply in September when it said it was investigating possible illegal tax irregularities that could impact its results. A supervisory board probe since found what it considered illegal acts relating to past tax matters, but concluded that “the integrity of past and present members of the board of management is not in doubt”.

Rabo Securities analyst Philip Scholte said TNT’s tax troubles were becoming less and less of an issue.

“After their press release in February I already got the feeling that this was not going to be huge any more. The statement confirms that,” Mr Scholte said.

TNT chief executive Peter Bakker said in February the firm viewed the risk of a tax liability materialising below 50 per cent in each individual case and thus did not have to take a provision under new IFRS accounting rules.

TNT which is selling its underperforming logistics activities to concentrate on mail and express delivery said it would take an additional tax charge in the second quarter as a result of the negotiations.

The charge was not expected to be significant to the group, TNT said.

A team of TNT logistics experts is on the start line to ensure this year’s Flora London Marathon on Sunday goes without a hitch.

Atherstone-based TNT Sameday will be delivering one million drinks and 600 tables to the 30 water stations that line the 26-mile route.

In connection with the further negotiations mentioned above, TNT expects to take an additional tax charge in the second quarter of 2006 that is not expected to be significant to the Group.

As previously disclosed: “Although we believe that the estimates and assumptions supporting our assessments are reasonable and are supported by external advice, our ultimate liability in connection with these matters will depend upon the assessments raised, the result of any negotiations with the relevant tax authorities and the outcome of any related litigation.”.