Global tax policy and principles of conduct

Global tax policy and principles of conduct

Financial Group, Inc. (“Principal”) has built its reputation on fundamental core values: Start with the customer, Do what’s right, Own what’s next, and Invest for our future. Acting with integrity is at the core, so fully embracing the value to “do what’s right” appropriately guides our approach to the organization’s management of global tax affairs.

The Global Code of Conduct states: “We’re committed to transparency in our financial reports. Our reports and accompanying disclosures are truthful, complete, consistent, fairly presented, timely, and understandable.” Consequently, has adopted a Statement of Global Tax Policy and Principles of Conduct directly applicable to tax matters.

is a socially responsible taxpayer embracing and enlisting organizational values to maintain a tax strategy striving to be tax compliant. Management of taxation is effectively delivered in a way to help customers achieve their financial goals, align with the long-term interests of stakeholders, and secure more sustainable societies. Further, although not addressed herein, products offered to customers are not knowingly provided to assist or encourage their abuse of tax laws and/or guidance thereunder.

Ultimately, paying the right amount of tax in all the right places is unquestionably critical to shaping a more secure and stable society for future generations. Therefore, strives to be an ethical corporate tax citizen, paying its fair share of tax within the respective laws of each tax jurisdiction where business is conducted. This is achieved through the following approach.

Our application of responsible tax principles

The below principles, presented in three main areas of: Approach to Tax Management, Relationship with Others, and Reporting to Stakeholders, guide Principal’s approach to offering a clear framework for responsible tax practice across the globe:

Approach to tax management:

Governance and tax risk management

Tax is considered a core part of corporate responsibility and governance under the oversight of the Board of Directors (“Board”). Key components of accountability and governance include:

  • The tax strategy and set of principles – are documented, maintained, and subject to annual approval by senior leadership and the Board as delegated to Board Committees thereunder (“Committee” or “Committees”);
  • Board accountability for the tax strategy – with responsibility for tax risk management as delegated to and overseen by the Vice President - Tax under the direct leadership of the Executive Vice President & Chief Financial Officer in coordination with other senior leadership and the Finance Committee of the Board;
  • Adherence to the tax strategy and principles – is ensured through available mechanisms, including the Ethics Hotline, that provide employees an opportunity to elevate and confidentially raise any issues of concern without fear of retaliation as documented in the organization’s Discrimination, Harassment, and Retaliation Policy;
  • Tax risk management – procedures are well-established, and assessments are carried out before engaging in any tax planning on significant transactions, as well as thereafter to evaluate changing risks in conjunction with the quarterly financial reporting processes;
  • Annual reporting to the board – occurs through Board delegation to the Finance and Audit Committees, to confirm awareness of and reaffirm the tax risk tolerance threshold applied by in forming tax positions and thereafter with the potential for changing risks of tax uncertainties, respectively;
  • Global applicability of tax strategy and principles – is managed through mechanisms to ensure awareness of and adherence by all organizational tax practices and locations; and,
  • employs qualified tax professionals – with appropriate levels of expertise and training to address the highly complex tax regimes across the globe, but also provides ready access to outside tax and legal resources when seeking confirmation of in-house determinations and/or when technical expertise is not maintained within the organization.
Compliance with the letter and spirit of applicable tax laws

The social responsibility of being an ethical corporate tax citizen, paying a “fair share of tax” within the respective laws of all taxing jurisdiction, is demonstrated by application of the following principles:

  • All required tax returns are prepared and filed – through provision of accurate, complete, and timely disclosures in all applicable taxing jurisdictions where does business;
  • Tax planning founded on reasonable interpretations of the law – in alignment with the substance of the economic and commercial activity of business operations in each respective taxing jurisdiction where business is conducted;
  • No transactions taken solely for a tax benefit – as decisions are made and positions founded on valid business reasons, exclusive of tax considerations, since does not structure transactions to simply generate tax benefits;
  • Tax positions taken are sound – with an aim toward certainty; however, where tax laws are unclear or subject to interpretation an evaluation of the likelihood of success is made to ensure the position at a minimum will more-likely-than-not be upheld based upon full and transparent knowledge of the applicable reviewing tax authority in any given jurisdiction; and,
  • Follow arm’s length principles – consistently for intercompany cross-borders transactions considering the applicable laws of each taxing jurisdiction, which are based on best practice guidelines published by the Organisation for Economic Co-operation and Development (“OECD”). Comparative third-party data is accumulated, transfer-pricing studies are regularly performed, and contemporaneous documentation is prepared annually to validate such arm’s length pricing.
Business structure based on substance

does not form or modify the business structure of the organization to simply generate tax benefits. Although understanding tax implications of various business structures is appropriate, the tax implications of a given business structure are but one of many business considerations. The following principles support the structure of entities within the organization for business purposes, opposed to simply generating tax benefits:

  • Transparency with global organization entities – providing information on legal name, legal ownership, country of origin, country or countries of operation, and primary business purpose;
  • Non-use of “tax havens” to avoid or minimize taxes – as has substantive and commercial reasons to transact business in identified “tax havens,” thus does not structure business operations to simply move global taxable income to low or nil-rate tax jurisdictions;
  • Tax paid on profits according to location of value creation – purposely, does not manipulate global tax systems, actively prepares for and monitors comprehensive global tax reform, and equitably allocates global taxable income or tax deductions based on currently enacted tax laws among the taxing jurisdictions where business is conducted; and,
  • These principles extend to relationships with employees, customers, and advisors – as does not engage in arrangements with a sole purpose to create a tax benefit in excess of what is reasonably understood to be intended by relevant tax rules.

Relationships with others

Relationships with tax authorities

The core value to “do what’s right,” or integrity, serves as the foundation on which operations are built. The approach to day-to-day management of tax and interaction with tax authorities is built on open and honest communications. fully co-operates with tax authorities in a positive, respectful, and courteous manner. This approach is achieved through application of the following principles:

  • Established procedures and channels are followed – to positively interact with tax authorities, government officials, ministers, and other third parties in a professional, courteous, and timely manner;
  • Open, transparent, and responsive interactions with tax authorities – are held in a straightforward and timely manner to assist in the evaluation of tax liability, including providing information regarding other tax jurisdictions when relevant;
  • Cooperative relations with taxing authorities – are maintained to allow the engagement of a proactive, constructive, and productive dialogue to discuss the tax planning strategy, risks, and significant transactions;
  • Actively address misunderstandings of facts or law with tax authorities – where possible to identify issues and explore options to reach resolution;
  • Seeking technical rulings from tax authorities – are based on full disclosure of all relevant facts and circumstances when determined to be necessary in order to clarify application of tax laws;
  • Engaging in early dialogue with tax authorities – occurs whenever practicable if there is significant uncertainty regarding how the tax laws apply to business operations or transactions; and,
  • Will not bribe – or otherwise induce any tax officials, government officials, or ministers with an intent of obtaining a more beneficial outcome with respect to tax matters.
Seeking and accepting tax incentives

When tax incentives offered by government authorities are claimed, seeks to be transparent and consistent with statutory and regulatory frameworks in accordance with the following principles:

Lobbying and advocacy in support of effective tax systems

Recognition of the social responsibility of to be an ethical corporate tax citizen highlights the importance of active, constructive engagement in national and international dialogue with governments, business groups, and civil society to support the maintenance or development of effective tax systems, legislation, and administration through use of the following principles:

Reporting to stakeholders

Transparency

Information is provided regularly to stakeholders, including investors, policy makers, employees, and civil society or the general public in varying levels of detail regarding the approach to tax and taxes paid through publication of the following

  • A tax strategy or policy – outlining the approach to dealing with tax risk management, tax authorities, and significant or key governance arrangements;
  • Regular updates on progress and key issues related to the tax strategy and principles – will be completed and shared accordingly;
  • Organization structure and entities – with ownership information and a brief explanation of the type and scope of activities will be maintained and readily available;
  • Explanation of subsidiaries, branches, and joint venture operations in low-tax jurisdiction – will support having substantive and commercial reasons for transacting business therein;
  • Explanation of overall effective tax rate and information on country level taxes paid – will be provided for the organization as a whole and by key countries of operation in aggregate on a basis consistent with the information recommended in compliance with the OECD Country-by-Country Reporting standards;
  • Financially material tax incentive information – will be provided where appropriate and significant, including an outline of incentive requirements and period of availability; and,
  • Approach to advocacy of tax issues – in all key tax jurisdictions regarding policy developments and the overall purpose of the engagement.