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CFO Agenda: Fragmentation of global tax rules could result in higher costs of doing business, warns Shell CFO

Simon henry

THE CFO of Royal Dutch Shell has warned that events such as Brexit and the fragmentation of global tax rules “is bad for everybody” and could result in higher costs of doing business and increased risks of cross border of investments and global trade.

Speaking to an audience of business leaders at the CFO Agenda, Simon Henry, chief financial officer of the FTSE 100 company, acknowledged that the level of public trust in business has been low since 2008 and “hasn’t really recovered since”.

Henry said improved tax transparency is “one of the few ways of improving trust” but warned that efforts would be hampered by the fragmentation of global efforts to implement policies such as the OECD’s Base Erosion and Profit Shifting (BEPS) project.

“BEPS and everything that has flowed from it, is a fair representation of how some companies have been correctly perceived by the public,” Henry said. “We support the principles that underline BEPS. But importantly companies need to recognise that it we cannot operate without societal acceptance.”

But, referring the UK government’s decision to implement a diverted profits tax, Henry said: “One of the biggest risks we face as corporates is the development of legislation that does not follow the basic principles of BEPS which is a multilateral approach with a set of mandatory minimum standards and expectation that fiscal authorities will work together and with companies to get to system that better reflect business models of 21st Century.”

Lack of trust

Henry was part of a panel that analysed the changing attitudes towards aggressive tax planning, which included Jolyon Maugham QC, the IoD’s head of taxation Stephen Herring and Martin McEwen, head of tax at SSE.

Research undertaken by SSE, the FTSE 100 energy supplier, revealed that only 6% of the public trust companies to provide their own information about their tax affairs, while only 34% of the public think big companies pay their fair share of tax. By contrast, 84% believed that SMEs did pay their fair share.

“Trust in big business has eroded,” said McEwen, who explained why the company sought accreditation through the Fair Tax Mark. “We were increasingly open and transparent about what we disclosed…but we reached a point where didn’t matter what we said. People weren’t going to trust us,” he added.

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