Below statements were found on the company's business website or are part of the company's annual report and provide a view how MNCs are dealing with corporate social responsibility in tax matters
The current economic environment has put the tax contribution of large multinationals at the centre of the debate (fair share). At Telefónica, the value of our tax contribution is a priority and a matter of prestige. The total tax contribution rose to 12,057 million euros.
Furthermore, in 2010 the Board of Directors approved our adherence to the Code of Good Tax Practices developed by the Large Businesses Forum along with the Spanish Tax Authority, in order to avoid the use of opaque structures for fiscal purposes.
Therefore, we do not use corporate structures to conceal or reduce the transparency of our activities from tax authorities or any other interested party. Nor are we present in any of the jurisdictions included in the list of tax havens legally established by Spain according to the 1st additional provision of Law 36/2006 on Measures for the Prevention of Fiscal Fraud in the wording updated by the Final Provision 2 of Law 26/2014 of 27 November.
Taxes in 2014
In 2014, our total tax contribution has risen to 12,057 million euros. Brazil and Spain were the jurisdictions that contributed most to tax payments.
This shows that for every 100 euros of our turnover, 23.9 euros were allocated to the payment of taxes, of which 7.1 euros were taxes incurred and 16.9 euros were taxes levied.
Based on the methodology of the distributed value produced by the CTT of PwC, for every 100 euros of value distributed by Telefónica in the 2014 fiscal year, 50 euros were allocated to tax payments.
According to the CTT methodology by PwC, a company's distributed value is the sum of the following elements: shareholder value (eg. dividends, reserves, etc.), wages and salaries (net of taxes collected from employees), net interest and taxes (incurred and levied).
Transparency goes beyond the observation of all applicable laws, rules, regulations and disclosure requirements. It requires the proactive consideration of the provision of information to tax authorities in respect of tax relevant facts and circumstances if they will aid the resolution of the matter under discussion.
For example if information not available in a territory is requested, Vodafone will not ‘hide’ behind territorial borders or the absence of legal obligations but will take reasonable efforts to provide the relevant fact based information.
This is a fundamental element of our aim to develop and foster good working relationships with tax authorities.
There is however a limit to proactive transparency where over time a relevant tax administration does not show it is willing to make its own contribution to a good and professional working relationship with Vodafone.
Tax strategy and transparency
ASML operates under a Code of Conduct. ASML’s Code of Conduct is published on our website under Code of Conduct in the Governance section (also see section 'Business ethics and human rights'). The tax principles under which ASML operates are derived from ASML’s Code of Conduct. This code and the related tax principles guide ASML's dealings with all different type of taxes which it is obliged to report and pay in the jurisdiction in which it operates, including taxes on profits, trade taxes, and taxes paid on employee income.
The rule and spirit of the tax laws
ASML will report and pay taxes in the jurisdiction in which it operates in accordance with all relevant tax laws and regulations. ASML will comply with such laws and regulations as well as with the spirit of those laws and regulations.
ASML’s worldwide profits are allocated to the various jurisdictions in which ASML operates based on the value created by ASML’s business in those jurisdictions. ASML’s allocation method for its worldwide profits is based on internationally accepted standards of profit allocation as published by the Organization for Economic Cooperation and Development (OECD) and relevant rules and regulations in the jurisdictions in which ASML operates.
Timely and complete compliance
ASML aims to file all the required tax-relevant filings with the appropriate tax authorities in a timely and complete manner. To assure timeliness and completeness, tax filings will be monitored through ASML’s corporate control framework and comprehensive tax control frameworks. The control frameworks are regularly reviewed and tested. Furthermore, ASML aims for timely payment of its taxes due to the tax authorities.
ASML strives for open and constructive dialogue with tax authorities on the basis of disclosure of all relevant facts and circumstances. ASML aims to be clear about all aspects pertaining to its tax position and share these in a transparent manner with tax authorities to achieve upfront certainty on tax matters.
Tax governance embedded in company management
To safeguard adherence to these tax principles, ASML maintains a well-educated and adequate staff of tax professionals who are in constant dialogue with ASML’s business and ASML’s senior management. ASML’s senior management is engaged and involved in ASML tax matters.
Business Control Framework: Risk Management and Compliance
KPN has set itself clear strategic objectives as explained in the strategy section of this report. Pursuing any business objective inevitably leads to taking risks. Risks can jeopardize those objectives in various ways.
Each type of risk encountered, is being dealt with in a manner and with the intensity that matches the nature and size of the risk in relation to the risk appetite of the KPN Board of Management.
The risk appetite is the total residual impact of risks that KPN is willing to accept in the pursuit of its (strategic) objectives.
The risk appetite per strategic objective or risk area is determined annually by the Board of Management. These risk areas comprise themes such as financial, strategic, compliance and (information) security themes.
Effective risk management is a key success factor for realizing the strategic objectives. Risk areas with a low risk appetite and thus a low acceptable residual risk require strong risk management. Risk areas with a high risk appetite need less risk management effort.
KPN Tax Strategy in Annual Report
We believe that transparency is a cornerstone of good tax governance. We regularly put forward understandable and timely communication about our approach to tax, our tax position and total tax payments on a country-by-country basis. We fulfill our disclosure obligations and are transparent to tax authorities. We support global initiatives of the OECD to promote tax transparency and responsible tax management.
DSM’s contribution to society includes the provision of employment to almost 24,500 people globally. In addition to corporate income taxes, DSM pays many other taxes including payroll taxes and social security contributions on the wages of its employees, value added taxes, customs duties, property taxes, etc. All these taxes are a significant source of funding of public services by governmental institutions at several levels globally. DSM sees it as its duty to contribute to this.
AkzoNobel has built a very strong foundation for sustainability and is recognized as a leader in its industry. This is demonstrated by our consistently high position on the Dow Jones Sustainability Index (DJSI), having being ranked number one in the Materials Industry Group in 2012 and 2013. We believe that a coherent and responsible position on tax is an essential element of our sustainability strategies. In that context, we have adopted the following tax principles.
Taxes are paid in accordance with all relevant rules and regulations in the countries in which we operate. We aim to comply with both the spirit and the letter of the law. Compliance is monitored through a Tax Control Framework. Additionally, also in managing tax affairs, our employees must adhere to the AkzoNobel Code of Conduct.
Tax follows business, and profit is allocated to countries in which value is created, in accordance with domestic and international rules and standards (such as the OECD Guidelines) and applying the arm's length principle.
We do not seek to avoid taxes through “artificial” structures in tax haven jurisdictions.
Relationship with tax authorities
We seek an open and constructive dialog with tax authorities on the basis of disclosure of all relevant facts and circumstances. We aim to enhance clarity and upfront certainty around tax.
We are transparent about our approach to tax and our tax position. Disclosures are made in accordance with the relevant domestic regulations, as well as applicable reporting requirements and standards such as IFRS.
The tax strategy of the company is to support Neste's business decisions and ensure their proper implementation also from tax perspective. Tax planning follows the business changes and rationale of the company and taxes and duties are paid, collected, remitted as well as reported according to respective local laws. Neste is committed to follow local laws as well as OECD Transfer Pricing Guidelines and transfer prices are based on public quotations whenever applicable quotation is available. High-quality tax compliance is the corner stone of Neste's tax management. Company contributes continuously to tax law drafting and practice development and is in favour of fair, clear and consistent tax system.
Fair Tax Policy
Kendrion strongly believes that pursuing a transparent and honest tax policy is a part of doing business. This is in line with the group’s Code of Conduct. In addition, the interests of all relevant stakeholders – a.o. customers, local communities, governmental institutions, shareholders – need to be balanced with this.
Tax payments can contribute to local development. In this respect, Kendrion does not only pay a substantial amount of corporate income tax in the countries where it does business, but is subject to several other taxes such as VAT, pay-as-you-earn tax deductions (withholding tax), payroll taxes and property taxes. Kendrion believes it has an obligation to pay the amount of tax legally due in any territory.
At the same time, it is in the interest of the company’s continuity and its financial results to optimise its tax position. This too is part of sound business operations. Kendrion also has a responsibility in this respect to its shareholders to enhance shareholder value. The commercial needs of Kendrion however remain paramount and all tax planning is undertaken in this context. All transactions must have a business purpose and/or commercial rationale: ‘tax follows business’. In addition, consideration is also given to the reputation of Kendrion and to its corporate and social responsibilities.
Another important aspect of Kendrion’s tax policy is to effectively manage risk and to comply with all applicable tax laws, rules, regulations and disclosure requirements. The aim is to comply with the letter as well as the spirit of the law. Kendrion makes use of the services of accredited tax advisers at both local and group levels and has included tax compliance in its internal audit programme. It goes without saying that in cases where (the interpretation of) the tax law is unclear, the optimal and most legally defensible position is taken. If necessary and feasible, tax authorities will be consulted in advance for additional certainty. Kendrion’s aim in this is to be open and transparent towards all authorities and to act with total integrity. Compliance with all anti-bribery legislation is safeguarded.
Transactions conducted between group companies located in different countries are conducted in line with the OECD Guidelines for Multinational Enterprises and other local transfer-pricing regulations. The company uses the Master File concept for transfer-pricing purposes to ensure that coherent and up-to-date principles are applied.
Kendrion is aware of the ongoing OECD BEPS developments in areas including treaty abuse, transfer pricing and country-by-country reporting. Given that Kendrion’s tax position corresponds to the geographical spread of the operations and that no aggressive tax structures are employed involving the movement of funds through secrecy jurisdictions (tax havens), the company believes that the impact of these developments is limited. Furthermore, even though Kendrion understands the tendency to use country-by-country reporting to gain more insight into local tax contributions, it has been decided, from the viewpoint of overall competitiveness, not to introduce this particular kind of reporting at this stage.
Other examples of Unilever, Heineken, ING and Rio Tinto
- Unilever - Global Tax Principles
- Heineken - Our approach to tax
- ING - Tax Principles
- Rio Tinto - Tax Transparency recognition
Other relevant chapters
- The changing tax world and taxpayer's impact
- Tax rulings and other measures similar in nature or effect
- Anticiperen op onze 'nieuwe' belastingwereld
- BEPS 2015 Final Reports
- UK - Improving large business compliance
- Developing a common framework for disclosing tax information
- Reputational risks
Written by Richard Cornelisse
I started my career as a manager at Arthur Andersen and then became a partner in EY where I led the indirect tax performance team for Netherlands and Belgium. Currently I am a senior managing director of Phenix Consulting.
I have over 20 years’ experience advising clients on international VAT issues. I am specialized in the tax aspects of financial transformations, shared service centre migration, and post merger integration work. I am also somewhat of a mentor, giving back to the profession. If you are interested in conversation and discussion, please feel free to contact me.
Phenix Consulting - our services - team - network
Embrace new technologies and catch up
Compliant tax software solutions for the global management of tax processes
In essence, HRMC’s increases its expectations towards large businesses with regard to a more and more transparent tax management strategy. However, the publication of a tax strategy will clearly not be sufficient. It is just the starting point for the provision of a clear picture about the risk management and controls in place of tax relevant processes. The daily management turns on the radar.
State-of-the-art tax compliance management software is required.
In difference hereto, the view into the current daily practice provides a different and non-compliant picture:
Widespread use of Excel spreadsheets, decentralized storage of tax relevant documents, lack of documented controls, lack of automation, global lack of tax compliance software tracking individual changes and filings, lack of standardized reports immediately available upon request, lack of in-built double-checks for the calculation of current and deferred taxes on reporting entity level, lots of tax relevant data stored at external outsourcers (e.g. external tax advisors and accounting firms), several tax software tools in place at various locations which are neither interfaced among each other and with the ERP systems in place, etc.
It is obvious that tax departments which are not adapting its process management to the requirements addressed by HMRC and other tax authorities may struggle with regard to compliance, efficiency and transparency.
Therefore, compliant tax software solutions for integrated tax management like the U² software from Universal Units become more and more important