Income Taxes

6 Months Ended

Jun. 30, 2019

Benefit/provision for income taxes:


	For the three months ended						For the six months ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Tax expense (benefit)	(33)		21		(31)		12
Effective tax rate	13.7	%	30.9	%	12.4	%	30.8	%

Our effective tax rate reflects the impact of tax incentives, non-deductible expenses, change in valuation allowance, a portion of our earnings being taxed in foreign jurisdictions at rates different than the Netherlands statutory tax rate and the mix of income and losses in various jurisdictions. Our effective tax rate for the first six months of 2020 was a benefit of 12.4% on a pre-tax loss compared with an expense of 30.8% on a pre-tax income for the first six months of 2019. The movements in our effective tax rate, apart from being in an expense position in 2019 and a benefit in 2020, relate mainly to the net effect of the decrease in the valuation allowance when compared to the same period in 2019 as there were no Netherlands related interest expense that was impacted by the interest limitation rules ($13 million) offset by the increase in non deductible goodwill ($10 million), both linked to the divestiture of the VAS business, as well as a decrease of tax incentives ($14 million) mainly driven by a lower qualifying income in 2020 and our related adjustments for changes in estimates of prior positions ($5 million) expense for the first six months of 2020 compared to a $9 million benefit for the first six months of 2019).

The Company benefits from income tax incentives in certain jurisdictions which provide that we pay reduced income taxes in those jurisdictions for a fixed period of time that varies depending on the jurisdiction. The predominant income tax holiday is expected to expire at the end of 2026. The impact of this tax holiday decreased for the second quarter of 2020 by $2 million and decreased by $2 million for the second quarter 2019 (YTD 2020: a decrease of $5 million and YTD 2019: a decrease of $4 million). The benefit of this tax holiday on net income per share (diluted) was $0.01 for the second quarter of 2020 (YTD 2020: $0.02) and $0.01 for the second quarter of 2019 (YTD 2019: $0.02).