A responsible taxpayer
Tax is a key issue for us, our stakeholders and other interested parties. The tax we pay is an important part of our wider economic and social impact and plays a key role in the development of the countries where we operate. We regard it as a critical element of our commitment to grow in a sustainable, responsible and socially inclusive way.
Our Code of Business Principles
Our Code sets the standards we live by
Our sets out the standards of behaviour we expect all employees to adhere to. This is no different when it comes to taxation. Tax evasion is illegal. We have a clear responsibility to comply in full with the laws in the countries in which we operate. We also choose to do this by respecting not only the letter of the law, but also the underlying tax policy intent.
We need to square our responsibilities as a co-operative, compliant taxpayer in each country where we operate, with the need to support competitive business growth. We must serve all our stakeholders, including investors, suppliers and employees. Sometimes this means that the total tax we pay in the country will decrease due to changes in our business model. For example, a decision to close a factory in the country would adversely impact the country’s tax revenue. These are important business decisions taken to ensure our future competitiveness. However, without taking these decisions the overall tax raising potential of our business would decrease.
Our tax strategy
Centralising parts of our business means we can offer consumers innovative products quickly. By bringing together activities in one location, we create efficiencies and economies of scale, which create value for our consumers and our shareholders. As a result, there are many transactions between Unilever Group companies, and the transfer pricing for these transactions must reflect an arm’s-length or market price. Our pricing is driven by the activities undertaken and the value created in each part of our business and is in accordance with the OECD transfer pricing guidelines and the transfer pricing rules and regulations prevailing in each country in which we operate.
Our tax principles
We, as part of Unilever group, follow Unilever’s tax principles. The tax principles are a clear articulation of our tax governance framework and, in those cases where judgements are required, they illustrate our perspective on tax risk.
We act at all times in accordance with all applicable local tax laws and are guided by relevant international standards (for example OECD Guidelines). We aim to comply with the spirit as well as the letter of the law.
We are transparent about our approach to tax. We regularly put forward understandable, timely and transparent communication about our tax policy and total tax payments.
3. Transfer pricing
We aim to pay an appropriate amount of tax according to where value is created within the normal course of commercial activity. Any transfer pricing is always calculated using the ‘arm’s-length’ principle.
Our approach to transfer pricing
We try to obtain certainty. Firstly, as part of Unilever Group, we follow Group’s transfer pricing policies and ensure that the said policies are consistently applied in all the transactions between the Group companies. Secondly, by entering into Advance Pricing Agreements with the relevant country tax authorities, based on full disclosure of all relevant information. We want to pay all the tax that is due, we just don’t want to pay tax twice on the same profits.
We do not use contrived or abnormal tax structures that are intended for tax avoidance, have no commercial substance, and do not meet the spirit of local or international law.
5. Tax havens
As part of Unilever Group, secrecy jurisdictions, or so-called ‘tax havens’, are not used for tax avoidance. There is no universally agreed list of tax havens, so we define this meaning as jurisdictions with no or low taxes. We do not have any such legal entities in HUL Group (‘HUL Group’ means HUL and all other group companies).
6. Accountability & governance
We ensure that as a business, we have the mechanisms in place to adhere to the above principles and provide both relevant training and opportunities for employees to raise any issues of concern confidentially, consistent with our Code of Business Principles.
We report to our Board’s Audit Committee on tax strategy and provide updates on tax regulation and key tax challenges we are facing. The Audit Committee receives an annual update on the HUL’s effective tax rate, tax provisions, key tax issues, and compliance with the Tax Principles.