Pricing and tax strategy
Striking the right balance is crucial
In 2022, our total Group tax contribution, including both taxes borne and collected, amounted to £40.4 billion.
We operate in a highly regulated industry, and tobacco taxes are an important source of revenue for many governments. Without regulation, consumer demand risks transferring to the black market. The global illegal trade already cheats governments out of around US$40 billion each year in taxes.
Why responsible tax management matters
Our global business is an important source of tax income for governments around the world and makes a valuable contribution to local economies. As multinational companies continue to face increased scrutiny in relation to their tax practices, stakeholders are calling for greater transparency to evaluate companies’ exposure to potential earnings, governance, reputational, and broader societal and macroeconomic risks.
Policies and Accountability
Our global tax strategy applies to all Group companies and is transparently published in our Combined Annual and ESG Report 2022. It is regularly reviewed by the Board.
The operation of the strategy is managed by the Finance and Transformation Director and Group Head of Tax, with the Group’s tax position reported to the Audit Committee on a regular basis.
The Board considers tax risks that may arise as a result of our business operations.
Our Management Approach
Our products are distributed in over 170 markets around the world. Our tax footprint extends beyond corporation tax, including significant payment of employment taxes and other indirect taxes, including customs and import duties.
The Group also collects a wide range of taxes on behalf of governments (including tobacco excise, employee taxes, VAT and other sales taxes). In addition to the major taxes paid, as outlined in the table, there are a host of other taxes the Group bears and collects such as transport taxes, energy and environmental taxes, and banking and insurance taxes.
The Group’s global tax strategy applies to all Group companies and includes:
- Complying with all applicable laws and regulations in countries in which we operate;
- Being open and transparent with tax authorities and operating to build mature professional relationships;
- Supporting the business strategy of the Group by undertaking efficient management of our tax affairs in line with the Group’s commercial activity;
- Transacting on an arm’s-length basis for exchanges of goods and services between companies within the Group; and
- Engaging in proactive discussions with tax authorities on occasions of differing legal interpretation.
Where resolution is not possible, tax disputes may proceed to litigation. The Group seeks to establish strong technical tax positions. Where legislative uncertainty exists, resulting in differing interpretations, the Group seeks to establish that its position would be more likely than not to prevail. Transactions between Group subsidiaries are conducted on arm’s-length terms in accordance with appropriate transfer pricing rules and OECD principles.
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