Westpac will reduce its tax bill by $635 million in the financial year just ended, following resolution of most of the tax consolidation issues surrounding the takeover of St George Bank in early 2008, it announced yesterday.The reduced tax will lift Westpac's reported net profit by the same amount.This will take Westpac's net profit to around $6.5 billion and it will, thanks to the tax reduction, report the largest profit in the sector - about $1 billion more than for the next highest, Commonwealth Bank (which reported its profit three months ago). Westpac is the last of the banks to report in a short profit season.This episode is also of interest for the signals it sends about how to measure bank profits in the first place.Westpac pointed out, in its ASX announcement yesterday, that had these issues been resolved in the prior financial year they would have been accounted for differently and processed as a reduction in merger goodwill.Perhaps it was on this basis that Westpac highlighted that the tax reduction "will not be included in cash earnings".On the other hand, the $635 million - which is tax the bank does not need to pay - is cash that counts for the purpose of working out its capital base (and will lift the core capital ratio by 24 basis points, the bank said).The inconsistent definition of "cash" earnings by banks is one issue, albeit a minor one, in a profit reporting cycle where the aggregate level of bank profits looks likely to be more controversial than usual.