Big oil boosts earnings from tax-haven affiliates

Source

Some of the world’s biggest oil corporations have boosted their earnings in recent years by paying very little or no taxes at all on profits of their affiliates in offshore tax havens, Reuters reported on Wednesday, citing a review of company filings and reports from rating agencies.

According to a special Reuters report by Tom Bergin and Ron Bousso, companies such as Chevron, Shell, BP, Total, and Eni have affiliates providing oil trading, banking, or insurance services in offshore tax havens, and the profits of those affiliates are either taxed very lightly or not at all.

All companies mentioned in the special report told Reuters they had operations in low-tax jurisdictions—not for tax purposes and avoiding taxes, which is not illegal—but for commercial reasons.

Oil supermajors have insurance and oil trading affiliates in tax havens such as Bahamas, Bermuda, Switzerland, the UK Channel Islands, and Ireland. They pay considerably less in taxes in those jurisdictions than they would have in the countries where they produce oil and gas.

According to documents reviewed by Reuters, Shell, for example, earned as much as US$2.7 billion tax-free in 2018 and 2019 from affiliates reporting profits in the Bahamas and Bermuda. That income accounted for 7 percent of Shell’s profits in 2018 and 2019, according to Reuters.

If Shell’s subsidiaries had been located in the Netherlands, the supemajor would have paid at least US$700 million in taxes on these profits, as per the Dutch corporate tax rate of 25 percent.

“Where Shell entities operate in low-tax jurisdictions, they are there for commercial and substantive reasons,” the company said in a statement to Reuters.

Profit-shifting—which all oil companies denied doing—deprives many oil-producing nations of additional oil tax income, experts in corporate taxation laws told Reuters. For some of those oil-producing countries, oil tax income from the big corporations is a vital source of government revenues.