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Swiss Role in Aggressive Tax Avoidance by Royal Dutch Shell

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Screen Shot 2014-10-30 at 09.22.43By John Donovan

The lead article in The Sunday Times Business section today (authored by Simon Duke and David Smith) says that Britain is at the forefront of a crackdown on corporate tax avoidance – a blitz on tax avoidance by multinationals.

The UK Treasury  is planning a consultation on forcing multinationals like Royal Dutch Shell to declare how much tax they pay in every country in which they operate.

Extract

Country by Country reporting would introduce greater transparency into the complex structures used by big companies to minimise their tax liabilities…

It is therefore interesting to note that earlier this year, two organisations – Stichting Onderzoek Multinationale Ondernemingen (SOMO) aka Centre for Research on Multinational Corporations and Friends of the Earth Europe, jointly published a 23 page report entitled “The Role of Switzerland in Shell’s Corporate Structure and Tax Planning.”

It is focussed on Shell’s Tax avoidance and points out the distinction between tax avoidance (unethical) and tax evasion (outright illegal).

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SOMO and Friends of the Earth Europe jointly took the initiative to clarify the role of Switzerland in Royal Dutch Shell’s corporate structure and tax planning. The aim of the research is to highlight the use of low-tax and secrecy jurisdictions by Shell in order to minimize its tax payments in other jurisdictions. This research should be seen in the context of Shell’s extensive global network of mailbox companies in tax havens like Bermuda, the Cayman Islands and the Bahamas, where they pay very little or no tax over their profits. Switzerland was chosen as an example because there are indications that Shell may be using Switzerland for tax purposes, at least since 2005, when the company shifted ownership of its brands and trademarks to a Swiss-based subsidiary, Shell Brands International AG. This company was registered in the canton of Zug, which is a very popular location for multinational corporations because of its particularly low income tax rates for foreign companies and because of Switzerland’s high secrecy regulations, in combination with Switzerland’s extensive network of double taxation treaties. It is hypothesised that Shell’s presence in Switzerland is potentially leading to significant tax losses for developing countries because Shell is able to use the specific advantages of the Swiss financial system (and other secrecy jurisdictions and tax havens) to lower its profits in developing countries, leading to lower tax payments there. Different Shell subsidiaries in Switzerland may play similar roles as Shell Brands International AG and have also been included in the research for this report.

A number of people, including a Swiss tax justice expert, reviewed the report which was supplied to Shell in advance of publication to give the company the opportunity to conduct a fact check and provide missing information. As could be predicted, Shell was not forthcoming.

The royaldutchshellplc.com website is cited as an evidence source for an internal Shell document.

Shell’s tax avoidance machinations are such that the Guardian is quoted as concluding that, “legally speaking, Shell is now simultaneously a British public company, tax-resident in Amsterdam, whose brands are Swiss.”

The report concludes by making recommendations to Shell, including that the company should implement full country-by-country reporting, to live up to their claims of leadership in tax transparency. Policy recommendations are also made to the Swiss Government and to the European Union to end the facilitation of aggressive tax avoidance by multinational corporations. (Closing paragraph from the report).

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Shell company DNA: price-rigging, tax dodging, flawed wonder fuels and a cover-up culture: 2 June 2013

A taxing time for Shell: 31 May 2013

Shell and ABN Amro ‘masters in tax avoidance’: 1 April 2013

Starbucks a novice at tax dodging compared with Shell: 7 December 2012

ROYAL DUTCH SHELL HISTORY OF TAX AVOIDANCE: 1 October 2011

Royal Dutch Shell Plc Tax Dodgers: offshore – and out of reach to the Revenue: 3 February 2009

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