This week in tax: Shell’s profits spark tax calls

Shell made a record global profit of £32.2 billion ($39.9 billion) in 2022 – almost double the figure from 2021 – according to the company’s annual report published yesterday, February 2.

The British energy company reported paying $13 billion in tax worldwide in 2022. This included $134 million paid in UK windfall tax and $520 million to the EU in solidarity contributions. However, the company expects to pay $500 million this year in the UK as the energy profits levy increased in January.

The combination of corporate tax and the energy profits levy means the company will face a combined headline rate of 75% this year. This is up from 65% in 2022, due to the rise in the energy profits levy from 25% to 35% in January. That levy is set to run until 2028.

Nevertheless, there are calls for higher taxes because the headline rates are the most a business will pay and not necessarily what a company has to pay under the law.

The IMF warned the Australian government that it may have to increase taxes to cover its level of public spending, yesterday, February 2.

So far Prime Minister Anthony Albanese has avoided raising taxes, but he may have to accept tax reform sooner or later. This could cost him politically because he pledged not to boost taxes.

The IMF has recommended such options as increasing the goods and services tax, ending the capital gains tax exemption on house sales, replacing stamp duty with land taxes, and cancelling the income tax cuts for high-income earners scheduled for July 2024.

Albanese inherited ‘stage three’ income tax reductions from his Liberal predecessor Scott Morrison. These personal tax changes will be costly to the government, but the Labor Party pledged not to reverse them during the 2022 election campaign.

The Australian economy may avoid a recession this year, but the IMF still argues that the spending plans baked into the budget will require an overhaul of the country’s tax system.

The Indian government announced its last union budget before the 2024 general election on Wednesday, February 1, but its strategy is to steer a steady course on tax policy.

Finance Minister Nirmala Sitharaman took a cautious approach in the 2023-24 budget with incentives to promote capital investment as the economy continues its recovery from the COVID-19 pandemic.

Prime Minister Narendra Modi may have presided over the introduction of the goods and services tax and a historic corporate tax cut, but his government does not want to risk spooking financial markets before an election.

The Modi government is also extending the 15% tax rate benefit to new cooperatives in manufacturing until March 31 2024, as well as keeping the tax exemption for start-ups until April 1 2024.

Meanwhile, the government is continuing the capital gains exemption on the transfer of Indian securities until March 31 2025. Foreign funds relocating to India can gain this exemption, as well as their investors.

ITR will be following Brazil’s transfer pricing reform in close detail as the legislative process ramps up. The National Congress has just 120 days to debate and decide the future of the proposal to re-introduce the arm’s-length principle.

We will also be interviewing Karl Berlin, tax director at Danish energy company Ørsted, on his company’s recent Fair Tax accreditation and what it means for other businesses around the world.

Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.