Tax transparency

Taxes are a vital source of revenue for countries around the world and help to fund essential services like education, health care and transport. In times of crisis such as the COVID-19 pandemic, taxes are also central to government policies to support people’s lives and livelihoods.

Being transparent is about showing how developing energy resources responsibly provides governments with an opportunity to generate revenues, support economic growth and enhance social development.

Shell publishes a Tax Contribution Report annually which sets out the corporate income tax that Shell companies paid in countries and locations around the world where Shell companies have a taxable presence. You can read our latest report here.

The Tax Contribution Report builds on the information we disclose in our Annual Report and Accounts, Form 20-F, the Sustainability Report and the Payments to Governments Report.

The report shows how our business activities are taxed globally. It outlines Shell’s approach to tax which is centred on compliance, transparency and open dialogue. Compliance is embedded in our Shell General Business Principles and the Code of Conduct. We do not condone, encourage or support tax evasion. In the report, we share information about our use of tax incentives and where we operate and why.

Overview of tax and other payments to governments 

(pie chart)

$3.4 billion

$3.5 billion

, and similar levies

$40.4 billion

$0.02 billion

$1.2 billion

$47.3 billion

Taxes paid and collected

$8.2 billion

Other payments to governments

Overview of tax and other payments to governments

Overview of tax and other payments to governments – in $ billion: $61.3 billion taxes paid and collected; $47.6 billion customs, excise duties, sales taxes and similar levies collected; $7.8 billion corporate income taxes paid; $5.9 billion government royalties paid (infographic)

In 2020, Shell paid more than $47.3 billion to governments. We paid $3.4 billion in corporate income taxes, $3.5 billion in government royalties and collected $40.4 billion in excise duties, sales taxes and similar levies on our fuel and other products on behalf of governments.

Incentives and low-tax jurisdictions

Governments use tax incentives to encourage investment in their country. Shell uses available and appropriate tax incentives where we have a qualifying business activity.

For example, in Poland, the government has designated zones to accelerate economic development. We created jobs in one of these economic development zones in Krakow and as a result qualify for tax incentives that partially exempt us from paying corporate income tax.

Governments sometimes set low corporate income tax rates to attract investment. When we are present in low-tax jurisdictions, we are there for commercial reasons. We do not use these locations to avoid taxation on activities that take place elsewhere.

In 2019, we launched a review of parts of our corporate structure against our Shell Responsible Tax Principles, which have been developed with the non-profit organisation, The B Team, and which guide our decisions on tax matters.

We frequently review our corporate and financing structures to ensure these remain consistent with our policies and principles. This has led to the liquidation and restructuring of some entities that were in low- or zero-tax jurisdictions. For example, in 2019, we ended our financing activities from Switzerland to some Shell operating companies and, in 2020, we ceased our lending activities in Bermuda.

Shell responsible tax principles

Principle 1: Accountability and Governance: Tax is a core part of corporate governance and responsibility and is overseen by Royal Dutch Shell plc’s Board of Directors. Principle 2: Compliance: We are committed to complying with the tax legislation of the countries in which we operate and pay the right amount of tax at the right time, in the countries where we create value. Principle 3: Business Structure: We will only use business structures that are driven by commercial considerations, are aligned with business activity and which have genuine substance. We do not seek abusive tax results. Principle 4: Relationships with Authorities: We seek, wherever possible, to develop cooperative relationships with tax authorities, based on mutual respect, transparency and trust. Principle 5: Seeking and Accepting Tax Incentives: Where we claim tax incentives offered by governments, we seek to ensure that they are transparent and consistent with statutory and regulatory frameworks. Principle 6: Supporting Effective Tax Systems: We engage constructively in national and international dialogue with governments, business groups and civil society to support the development of effective tax systems, legislation and administration. Principle 7: Transparency: We provide regular information to our stakeholders, including investors, policymakers, employees, professional service providers and the general public about our approach to tax and taxes paid.
Corporate income tax
This is a direct tax imposed on companies’ profits. It is sometimes levied at a national level but can also be levied on a state or local basis.
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Royalties
Royalties are generally payment due for the use of an asset. Mineral royalties are payments to governments or other owners for the rights to extract oil and gas resources, typically at a set percentage of revenue less any deductions that may be taken. See also Trademark royalties.
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Excise duties
This is a tax on manufacturers and is due at the point of production rather than sale. Companies which manufacture products that are subject to excise duties are responsible for reporting and paying these taxes. Excise taxes are in addition to other forms of indirect tax, such as customs duties, VAT or GST, and typically form part of the cost of the product.
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Consumption taxes
A tax due on the purchase of goods and services. Typically, this is a percentage of the sales price of the item or service. It is an indirect tax as it is levied and administered by the retailers or service providers but it is borne or paid by the individual purchasing the item. The companies that charge the tax have to administer the collection and payment on behalf of the government.
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Production entitlement
This is the host government’s share of production. It includes the government’s share as a sovereign entity or through its participation as an equity or interest holder in projects within its home country.
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Bonuses
Payments for bonuses usually paid upon signing an agreement or a contract, or when a commercial discovery is declared, or production has commenced or production has reached a milestone.
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Fees
Fees and other sums paid as consideration for acquiring a licence for gaining access to an area where extractive activities are performed. Administrative government fees that are not specifically related to the extractive sector, or to access to extractive resources, are excluded. Also excluded are payments made in return for services provided by a government.
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