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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.

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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Indirect taxes
Taxes raised on goods and services rather than income and profits. Examples include VAT, GST, sales tax, customs duties, excise duties, stamp duty, services tax, registration duty and transaction tax.
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Value-added tax (VAT) is a specific type of turnover tax levied at each stage in the production and distribution process. Although VAT is ultimately levied on the consumer when they purchase goods or services, liability for VAT is on the supplier of goods or services. VAT normally utilises a system of tax credits to place the ultimate and real burden of the tax on the final consumer and to relieve the intermediaries of any final tax cost. See Non-recoverable VAT.

In certain jurisdictions it is often referred to as a Goods and Services Tax (GST) or equivalent. See GST.

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