There are different definitions of low-tax jurisdictions and so-called tax havens, but they are typically considered to mean countries with significantly lower effective tax rates compared with the average rates offered by other countries.
Governments determine the rate of corporate income tax and sometimes set low rates to attract investment from outside their borders. Most governments and international organisations, such as the OECD, respect the sovereign right of governments to determine tax matters.
Shell has a taxable presence in 99 countries and locations with different tax regimes and varying corporate income tax rates. When we are present in low-tax jurisdictions, we are there for commercial reasons, including oil or crude trading, companies that hold investments or perform other services we need such as pensions, finance and insurance, and retail sites. In line with our Responsible Tax Principles, we do not use these locations to avoid taxation on activities that take place elsewhere.
Before establishing any new business in a low-tax jurisdiction, we review the OECD’s substantial activities requirements. These ensure that companies operating in low-tax jurisdictions have real substance and are not located there purely for advantageous tax reasons.
As an international business with a presence in many different countries and locations, Shell can choose where to establish business support services or other activities which can be centralised. When we invest in a country, we consider a wide range of factors. These include accessibility to local or regional markets, the stability of the political, regulatory and social environment, local infrastructure and workforce, and the overall costs of operation. The attractiveness and stability of a country’s fiscal terms are also taken into account. However, the investment must first meet our strategic, business or operational aims.
Our Responsible Tax Principles apply to all our countries of operation. In this report, we share more information about low-tax jurisdictions. Further information on entities and ownership is available in the 2018 Annual Report and Form 20-F.