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Introduction from the Chief Financial Officer

Sinead Gorman, Chief Financial Officer (photo)
Sinead Gorman
Chief Financial Officer

In 2022, we achieved strong results as we continued to provide the energy our customers need. In a volatile geopolitical environment and against a backdrop of high energy prices, we reported a profit before tax of $64.8 billion and paid $13.1 billion in corporate income tax. By paying taxes, we help provide governments with revenues to invest in essential public services, such as health care and education, for the benefit of their economies and people.

In this, our fifth annual Tax Contribution Report, we provide details of the corporate income tax we pay in 97 countries and locations, and disclose our total tax contribution for 48 of these. We also give details of the tax incentives we benefit from in India, Malaysia, the Netherlands, the Philippines and Turkey. Tax incentives encourage investment, employment and economic development, and are a key element of fiscal policy. 

In this report, we set out how we believe governments should shape their policies to advance the energy transition by, for instance, encouraging investment in low-carbon energy, while meeting the economic and social needs of their countries and communities.

Some governments imposed windfall taxes on energy companies in light of higher revenues in 2022 after Russia’s invasion of Ukraine. Shell expects to pay windfall taxes on profits made in 2022 of more than $1 billion, some of which we have paid in 2022 and 2023. The rest is due in coming years. In this report, we give details of the windfall taxes in Belgium, Germany, Italy, the Netherlands and the UK, and how they affect Shell.

Our annual review of our presence in low-tax jurisdictions continues to help us identify opportunities for restructuring and liquidation. In line with our Responsible Tax Principles, we aim to be in low-tax jurisdictions only when there is a commercial reason for being there. As of October 2023, we have liquidated 24 legal entities in low-tax jurisdictions since 2019, and we are in the process of liquidating 11 others. 

Shell strongly supports a transparent and co-ordinated approach to improving the global tax system rather than unilateral, unco-ordinated legislative actions. That is why we welcome the OECD’s framework for the global taxation of multinational enterprises. We give our views through public consultations to address, among other things, the risk of double taxation, and we support rules to resolve cross-border tax disputes. 

Part of this framework would require large multinationals like Shell to pay at least 15% tax on the profits they make in each jurisdiction where they operate. This may result in us paying additional taxes each year on our activities in low-tax jurisdictions.

Fair taxation enables economies to grow. This report demonstrates how, by paying taxes, Shell works to support the many countries in which we operate. 

Commercial reasons or commercial considerations
Commercial reasons or commercial considerations refer to activities undertaken with a view to making a profit. An entity’s presence in a country should be the result of commercial activities and it should have the appropriate substance to perform those activities. The management and directorships of the operating company should be in the country of operation.
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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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Double taxation
This arises where the same income is taxed twice by two or more different tax jurisdictions.
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Low-tax or zero-tax rate jurisdiction
See Tax Haven.
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Multinational enterprise or corporation
A multinational enterprise (MNE) or multinational corporation is a company or group of companies with business establishments in two or more countries.
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Profit before tax
Profit or loss before tax is reported in Shell's Consolidated Statement of Income. This is the profit or loss calculated using Group accounting policies. Local statutory accounts may need to comply with local accounting standards which may be different. The local statutory accounting profit or loss is the basis for the calculation of taxable profits in individual countries or locations. Local tax laws are then applied to the profit or loss. Profit before tax shows the Group accounting result but not the profits subject to tax after compliance with local tax laws. Any share of profit or loss from non-consolidated joint ventures and associates is attributed to the country where the shareholding entity is based. This figure is reported after accounting for corporate income tax accrued in the joint venture or associate's accounts and is included in the shareholding entity's profit before tax.
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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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