Tax and transparency
Tax binds governments, communities and businesses together. Revenue transparency provides citizens with important information to hold their government representatives accountable and to advance good governance. Shell is committed to transparency.
Our operations generate revenue through taxes and royalties for governments around the world. In 2016, Shell paid more than $55.6 billion to governments. We paid $4.4 billion in income taxes and $2.3 billion in government royalties, and collected $48.9 billion in excise duties, sales taxes and similar levies on our fuel and other products on behalf of governments.
For Shell, paying taxes in the countries where we operate is about more than complying with the law. It is about showing that extraction of natural resources provides governments with an opportunity to generate revenues, support economic growth and enhance social development.
We comply with applicable tax laws wherever we operate. We are transparent about our tax payments to governments and we strive for an open dialogue with them. This approach helps us to comply with both the letter and the spirit of the laws.
In line with the Shell General Business Principles, we support several external voluntary codes, which include the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the Business and Industry Advisory Committee to the OECD Statement of Tax Principles for International Business.
In 2012, we were one of the first energy companies to voluntarily publish revenues that our operations generate through income taxes, royalties and indirect taxes for governments around the world. As of 2016 onwards, Shell makes mandatory disclosures under the Reports on Payments to Governments Regulations 2014, and files its Payments to Governments Report with the UK’s Companies House instead. The report covering calendar year 2016, which will integrate BG figures, will be published on www.shell.com/payments by the end of June 2017.
It is the right of governments to determine tax policies and tax rates and to draft tax laws accordingly. They do so against strong competition for capital and investment, which is internationally mobile. It is not the role of business to form views on what level of taxation is adequate or required. We use legitimate tax incentives and exemptions designed by governments to promote investment, employment and economic growth.
When considering the viability of investments, tax is one of the factors we examine. Income tax is just one part of the overall tax regime considered. We expect to pay tax on our income in the country where activities take place, and believe double taxation of the same activity by different jurisdictions should be avoided. Shell supports efficient, predictable and stable tax regimes that incentivise long-term investment. We expect the laws to be applied consistently, creating a level playing field for all.
Governance of tax
Shell’s Board of Directors is responsible for maintaining a sound system of risk management and internal control, and for regularly reviewing its effectiveness. This system also covers taxation, which forms an integral part of the Shell control framework. Annually, the Board conducts a review of the effectiveness of Shell’s system of risk management and internal control, including financial, taxation, operational and compliance controls.
Collaborating with others
Shell supports cooperative compliance relationships with tax authorities on the basis of the framework proposed by the OECD Forum on Tax Administration. We have a cooperative compliance relationship in the UK, the Netherlands and Singapore. In Italy, we have filed an application for a cooperative compliance relationship; in Austria, we have a pilot relationship, and we continue to explore establishing similar relationships with other countries.
We provide the authorities with timely and comprehensive information on potential tax issues. In return, we receive treatment that is open, impartial, proportionate, responsive and grounded in an understanding of our commercial environment. This approach improves the transparency of our tax affairs and allows Shell to better manage its tax-related risks throughout the life cycle of each project.
Transparency is only effective if all parties in a country follow the same disclosure standards. Shell is a founder and board member of the Extractive Industries Transparency Initiative (EITI). Consistent with the EITI requirements, we continue to advocate mandatory country-by-country global reporting, as most tax payments are made at the corporate level to national governments. We support unified revenue reporting rules and standards applicable to all multinationals, irrespective of their ownership or place of business.
Shell is actively involved in the revenue transparency discussion and we are working with stakeholders to develop an approach that takes into account the views of the relevant stakeholders involved, i.e. industry, governments and civil society.