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Message from the Chief Financial Officer

Jessica Uhl, Chief Financial Officer (photo)
Jessica Uhl, Chief Financial Officer

Early in 2021, we set out our Powering Progress strategy, which has four main goals: generating value for our shareholders, achieving net-zero emissions, respecting nature and powering lives and livelihoods. We have set ambitious targets against each of these goals as we work to play a leading role in the energy transition while making a positive contribution to society. 

In November, we took a further step to simplify Royal Dutch Shell plc and strengthen our competitiveness. We announced plans to establish a single line of shares, and to align the tax residence of Royal Dutch Shell plc with its country of incorporation in the UK. This proposal, which has been approved by our shareholders, will allow us to manage our portfolio with greater agility and to accelerate distributions to shareholders, among other benefits.

We believe these changes will support the delivery of our strategy, including our focus on being a responsible provider of energy products, while demonstrating our values and principles. These values and principles are reflected in our commitment to safety, to respecting human rights and to paying the right amount of taxes so that we make a meaningful financial contribution to the countries where we operate.

As countries seek to rebuild economies affected by the COVID-19 pandemic, the payment of taxes by companies is more important than ever. We support the co-ordinated effort to make the global tax system fairer and the agreement to establish a global minimum corporate tax reached by the G20 leaders, together with the Organisation for Economic Co-operation and Development. 

Transparency in challenging times

One of the ways we can show we are responsible contributors to society is to be transparent about what we do. That is why we are publishing our third Tax Contribution Report, which details the corporate income tax we have paid in 99 countries. Each year, we look to expand and improve our report and I hope you find value in these changes.  

This report covers 2020, a year when the COVID-19 pandemic had a devasting effect on people’s health and finances, triggering an economic downturn. The oil industry faced falling demand and the first negative oil price in history.

We reported a total loss before tax of $27 billion in 2020. Shell companies still paid $3.4 billion in corporate income tax as some of our companies made a profit in 2020 and/or settled taxes from the previous year. Shell paid a further $3.5 billion in royalties to governments. We collected $40.4 billion in excise duties, sales taxes and similar levies on our fuel and other products on behalf of governments. And we made other payments to governments including $7 billion in production entitlements, $1.2 billion in fees and $16 million in bonuses.

Expanding our reports

Shell continues to be open about the taxes we pay while looking to provide more insight into the role of tax in our businesses. For example, for this report, we have reviewed our reporting of tax incentives, including exemptions and reliefs. Governments around the world use tax incentives to encourage investment, job creation and to support certain industries. They also use them to drive key policies, such as reducing carbon emissions and protecting the environment.

We believe that more transparency around these incentives will lead to greater understanding of what they are intended to achieve and whether they are meeting their goals. We have expanded our reporting of tax incentives as a result, with many examples in this report.

We have also continued to review our presence in low- and zero-tax jurisdictions, countries with significantly lower tax rates than the average, against our Responsible Tax Principles. This resulted in our ending some activities in Bermuda and St Lucia. And we will keep assessing whether our presence in low-tax jurisdictions is appropriate for our business.

Wider contribution

This report includes a breakdown of our total tax contribution in five countries where we have key business activities: the UK, the USA, the Netherlands, Nigeria and India. This goes beyond corporate income tax to include the taxes we pay as an employer, such as social security payments, and the taxes we collect from our employees on behalf of governments.

We hope this more detailed look at these five countries provides a clearer picture of our activities and contribution to the countries where we operate. We will extend this approach to other countries if we hear from investors, governments, non-governmental organisations and wider society that it would help them to further understand our contribution.

Thank you for your interest in understanding Shell and our approach to tax. We welcome your feedback as we look to provide meaningful and insightful information on the taxes we pay.

Jessica Uhl
Chief Financial Officer

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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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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Throughout this report, “country” is used as the primary descriptor for a geographical area because that is the word used by the OECD/G20 Base Erosion and Profit Shifting (BEPS) project in their proposal for country-by-country reporting (CbCR). This is one of the four minimum reporting standards to which over 100 countries have committed, covering the tax residence jurisdictions of nearly all large multinational enterprises (MNEs). In this report “country” may also refer to locations, jurisdictions or territories which have their own tax regimes or discrete rules.
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Low-tax or zero-tax rate jurisdiction
See Tax Haven.
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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 Trademark royalties.
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Sales taxes
See Consumption taxes.
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Tax incentives
There is no common definition of a tax incentive. Shell defines tax incentives as fiscal measures designed by governments to stimulate investment and encourage growth, or a change of behaviour, by providing more favourable tax treatment to some activities or sectors. Incentives can include accelerated tax relief for capital expenditure on infrastructure, exemptions from certain taxes where government economic targets (for example employment targets) are met, or a favourable tax treatment of costs related to research and development activities for certain technologies.
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