This Article is From Dec 09, 2020

How Oil Majors Move Billions in Profits To Island Tax Havens

International oil corporations game global tax systems

How Oil Majors Move Billions in Profits To Island Tax Havens

Oil companies transfer capital to tax havens to set up banking units to lend money to sister firms.

Bermuda and the Bahamas aren't exactly big players in the oil-and-gas world. They don't produce any of the fossil fuels at all. Yet the islands are deep wells of profit for European oil giant Royal Dutch Shell Plc.

In 2018 and 2019, Shell earned more than $2.7 billion — about 7 per cent of its total income in those years — tax-free by reporting profits in companies located in Bermuda and the Bahamas that employed just 39 people and generated the bulk of their revenue from other Shell entities, according to company filings.

If the oil-and-gas major had booked the profits through its headquarters in the Netherlands, it could have faced a tax bill of about $700 million based on the Dutch corporate tax rate of 25 per cent. The bill would have been much higher if the income were reported in oil-producing countries — some of which levy rates exceeding 80 per cent.

Shell and other oil majors are avoiding hundreds of millions of dollars in taxes in countries where they drill by transferring profits to thinly staffed insurance and finance affiliates based in tax havens, according to a Reuters review of corporate filings and rating agency reports. Shell, BP Plc, Chevron and Total use subsidiaries in the Bahamas, Switzerland, Bermuda, the UK Channel Islands and Ireland to provide their global operations with banking, insurance and oil-trading services, the documents show. These subsidiaries, in turn, book profits that go lightly taxed or entirely tax-free.