Corporate income tax

In 2022, Shell reported pre-tax income of $64.8 billion, compared with $30 billion in 2021, and paid $13.1 billion [A] in corporate income taxes. We reported a corporate income tax charge of $21.9 billion for 2022.

Our effective tax rate (ETR) is calculated by dividing the corporate income tax charge of $21.9 billion by the total income before taxation of $64.8 billion, resulting in an ETR of 33.8% for 2022. For comparison, in 2022 the average corporate income tax rate levied by the 38 countries that were members of the OECD was 23.6% [B]. Our ETR is typically higher than the average corporate income tax rate in OECD countries, partly because many governments apply a higher corporate income tax rate to profits made by oil and gas production activities. In some cases, this corporate income tax rate can be more than 80%. Our ETR is a blend of the different statutory tax rates and the different corporate income tax laws applied to our various businesses.

[A] In 2022, we paid $13.1 billion in corporate income taxes and accrued $0.3 billion of withholding taxes. This gives a total of $13.4 billion in corporate income taxes and withholding taxes  reported as corporate income tax paid in our country-by-country report.
[B] OECD (2023), Corporate Income Tax: Corporate income tax rates (Edition 2022), OECD Tax Statistics (database).

Corporate income tax reconciliation

The chart below provides a reconciliation between our 2022 corporate income tax charge of $21.9 billion and the corporate income tax we paid of $13.1 billion as per our Annual Report and Accounts 2022.

The corporate income tax charge consists of the current tax charge plus the deferred tax charge. Deferred tax arises when there is a timing difference between the tax and accounting treatment of an asset or liability shown on the balance sheet. For example, decommissioning costs are accrued for accounting purposes over several years; however, they may not be tax deductible until the decommissioning costs have been paid. Deferred tax can, therefore, smooth out large differences in the tax charge over a number of years. 

The current tax charge consists of the corporate income tax accrued on our 2022 taxable profits, as well as adjustments to the current tax charge accrued in previous years. The current tax charge for a given year is on an accruals basis for accounting purposes, whereas corporate income taxes are paid in accordance with the relevant tax legislation, resulting in some taxes being paid in-year, and some after year end. For example, in Nigeria, petroleum profit taxes need to be paid in monthly instalments on the basis of estimates, starting in March of the current year and ending in February of the following year, followed by a final payment (or refund) when the tax return is filed in May.

The difference between the current tax charge and corporate income taxes paid is therefore a result of the phasing of tax payments across several years.