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19. Income Taxes1. The Company and its consolidated subsidiaries are subject to a number of taxes based on income which, in the aggregate, resulted in a statutory tax rate of approximately 30.86% and 33.06% for the years ended March 31, 2017 and 2016, respectively. Income taxes of the foreign consolidated subsidiaries are based generally on the tax rates applicable in their countries of incorporation. The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2017 and 2016 differ from the statutory tax rate for the following reasons:20172016Statutory tax rate30.86%33.06%Effect of:Permanently non-deductible expenses for income tax purposes such as entertainment expenses0.390.40Permanently non-taxable income for income tax purposes such as dividend income(16.68)(10.49)Municipal Tax0.370.34The difference of tax rates applied to foreign subsidiaries(5.14)(8.77)Tax deduction in accordance with special tax measures(3.28)(2.93)Decrease of valuation allowance for such as net operating loss carryforward1.565.52Consolidating adjustment of dividend income from consolidated subsidiaries18.1213.95Effect of revised corporate tax rate―1.53 Other, net1.033.28Effective tax rate27.23%35.89%2. The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 were as follows: Millions of yen Thousands ofU.S. dollars201720162017Deferred tax assets:Accrued bonuses¥   699¥   698$  6,235Accrued enterprise taxes1701351,521Operating loss carryforwards1,1077209,872Net defined benefit liability3,7363,46233,302Retirement benefit trust1,1411,34810,174Research and development cost5624975,015Loss on valuation of inventories2692692,398Allowance for doubtful accounts1381211,232Unrealized gain3503713,126Excess of depreciation expense3313852,953Other6805756,068 Gross deferred tax assets9,1888,58781,904Valuation allowance(959)(912)(8,549)8,2297,67573,355Deferred tax liabilities:Revaluation of fixed assets in accordance with special tax measures(187)(192)(1,667)Net unrealized holding gain on securities(343)(253)(3,059)Depreciation expense of subsidiaries(508)(211)(4,533)Dividend income from consolidated subsidiaries(460)(846)(4,104)Other(75)(97)(675)(1,575)(1,601)(14,040) Net deferred tax assets¥ 6,654¥ 6,074$ 59,314Note: The net deferred tax assets as of March 31, 2017 and 2016 were included in the following items on the consolidated balance sheets: Millions of yen Thousands ofU.S. dollars201720162017Current assets–Deferred tax assets¥1,614¥1,121$14,390Noncurrent assets–Deferred tax assets5,0634,97845,137Current liabilities–Other101496Noncurrent liabilities–Other131011675LINTEC ANNUAL REPORT 2017