Indirect tax advocacy
Changes to laws governing indirect taxes, such as value-added tax (VAT), are frequent and often complex. Many of these developments are linked to the energy transition and to economic recovery from the COVID-19 pandemic.
As a global business with substantial tax-paying and tax-collecting obligations, Shell contributes its experience and insight to discussions aimed at strengthening tax processes and controls. Together with other companies, we continue to call for simple and harmonised regulations, wherever possible, to support fair and efficient indirect tax systems.
Using taxes for emissions reduction
Governments regularly use indirect taxes to encourage businesses to take action to reduce their carbon emissions. For example, governments might implement lower VAT rates on the purchase of solar panels and additional taxes on chemical or petrol products. Shell supports indirect tax measures when a government applies them consistently and when they are aligned with the government’s overall policy framework for emissions reduction.
Adapting to new business models
Many tax authorities are struggling to adapt existing indirect tax legislation to new business models within a globalised and increasingly digitalised economy. For most countries, VAT legislation was designed for simple, linear supply chains of goods or services where production, supplier and customer were within a single country.
The energy transition is also triggering debate about how to update or introduce indirect taxes to new areas of the economy. Within the European Union, for instance, there is continued discussion about where VAT should be paid for electric vehicle (EV) charging networks and whether the energy producer, supplier or retailer is responsible for collecting the tax.
Shell believes that it is important that VAT be applied to electric vehicle charging in a way that provides certainty to all network participants, while allowing the sector to grow. Shell continues to be an active participant in discussions with the European Commission to agree an appropriate and harmonised approach. Read more in Electric vehicles and tax.
Digitalisation to combat fraud
Tax authorities are increasingly requiring certain tax reporting to be made online and in real time as a way to combat indirect tax fraud. For example, in Spain businesses are required to report VAT very shortly after it is charged. Shell contributes to the debate around the digitalisation of tax. We support proportionate and targeted measures that safeguard VAT revenues for tax authorities without placing onerous additional compliance burdens on taxpayers.
In certain jurisdictions it is often referred to as a Goods and Services Tax (GST) or equivalent. See GST.