Tax Governance
Our Policy
Aligned with our Sustainability Principles—and under the leadership of our senior management executives—INPEX is committed to ensuring tax compliance in the countries in which it operates. We adhere with both the spirit and the letter of the laws of respective countries, and engage in ethical business conduct in accordance with all international and social norms. Our officers and employees acknowledge that one of our key social responsibilities is to foster the socioeconomic development of the countries and regions in which we operate. This is achieved through responsible tax payments in accordance with relevant laws and regulations, as well as ensuring the transparency of our tax practices.
As part of our commitment to maximizing shareholder value, we strive to optimize tax expenses by utilizing available tax incentives and eliminating double taxation in the normal course of business activities. We will not apply schemes (using tax structures with no commercial entity) or engage in tax planning with the intent to avoid taxes, nor will we migrate created value to countries with low tax rates (using tax havens) with the intent to avoid taxation.
In addition, the transfer prices we apply to international transactions are calculated in accordance with the independent enterprise principles, as prescribed in the OECD Transfer Pricing Guidelines.
Tax Governance Structure
As a global business, our overseas subsidiaries and cross-border transactions with those subsidiaries are increasing. Following the publication of the 2015 Final Reports issued by the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project1 in October 2015, a global consensus was reached to address tax-related issues resulting from the digitalization of the economy in the form of the OECD/G20 Inclusive Framework on BEPS in October 2021. Legislation governing international transactions has been developed in Japan and other countries based on the consensus, and the environment surrounding international taxation continues to undergo significant change. In accordance with those changes, we are strengthening our tax governance to effectively respond to taxation risks associated with international transactions. As a part of our efforts, with the aim of raising awareness of tax compliance among all our officers and other employees, we established our Tax Policy by determination of the Board of Directors and publish it on our website. The Senior Vice President of the Finance & Accounting Division is responsible for such efforts.
In FY2021, we developed Tax Management Rules to promote tax compliance actions by our officers and other employees in line with our Tax Policy. We also introduced our Tax Management Policy, which stipulates the establishment and operation of a tax management structure in accordance with the Tax Management Rules. Our Tax Management Rules stipulate that we shall not carry out transactions solely for the purpose of tax reduction that at odds with the spirit of tax treaties or laws and regulations.
1 OECD/G20 Base Erosion and Profit Shifting (BEPS) Project: Project to review overall international taxation rules to prevent excessive tax avoidance by global companies using gaps and loopholes in the international taxation system
Taxation Risks
We identify taxation risks as an important business issue. In compliance with our Tax Policy, our division in charge of tax affairs works to mitigate taxation risks by developing a deeper understanding of the tax laws in each country in which we operate, transfer pricing taxation, other international tax laws, and OECD tax guidelines. The division also cooperates and communicates closely with other divisions to mitigate taxation risks. We also make effective use of external expert advice in mitigating these risks.
Relationships with Tax Authorities
We strive to build constructive and trusting relationships with tax authorities and pay taxes appropriately, such as by obtaining certainty through advanced pricing agreements.
Tax Transparency
There is global movement for greater transparency and information disclosure in relation to corporate tax-related activities. As an example, the government of Australia—one of our core business areas—issued a set of principles (the Voluntary Tax Transparency Code) stipulating the voluntary disclosure of tax information by large corporations. In accordance with these principles, we annually publish a tax transparency report2 that consolidates our Australia-related tax information, including an overview of our local tax governance and cross-border transactions, and how much tax we pay, on our website. We also annually publish the amounts of tax and other payments made to the governments of countries participating in the Extractive Industries Transparency Initiative (EITI)3.
As a global company, we will continue to closely monitor international taxation trends and legislative developments in each country and strive to adapt to them in a timely and appropriate manner.