Colas approach to tax
1.1 Bouygues Group
Operating in nearly 90 countries, Bouygues is a diversified industrial group whose businesses are organised around three sectors of activity (the ‘Group’): construction, telecoms and media. The Group has 117,997 employees, a market capitalisation as at 31 December 2016 of euro 12bn and is a member of the CAC 40 listed on the Paris Stock Exchange. Within the UK, Bouygues only carries out construction activities and these are further sub divided between its Colas and Bouygues Construction divisions.
Our business activities generate a substantial amount from a variety of taxes, both globally and within the UK. We pay corporate income taxes, withholding taxes, import taxes, stamp duties, employment and other taxes. In addition, we collect and pay employee taxes as well as indirect taxes such as excise duties and VAT for the UK Exchequer.
Bouygues’s values are presented and elaborated in the Group’s Code of Ethics and in its Human Resources Charter. The Bouygues Group’s corporate social responsibility policy and initiatives are described in chapter 3 “Human resources, environmental and social information” of the Registration Document. Bouygues’s values are public, shared with the various stakeholders of the business and applied to its tax governance. Bouygues has therefore produced and made available to the public this document in compliance with the requirement of Schedule 19 of the UK Government’s 2016 Finance Act and in respect of its Group entities operating in the UK.
1.2 Colas roads, railways and roofing in the UK
Colas provides roads and railway construction & maintenance, and roofing. UK sales in 2016 were £520m and it employed 3,200 people. Colas in the UK aims at creating long-term sustainable value for shareholders by helping to meet growing demand for road, railway and roofing projects and associated ancillary services in a safe and responsible way. It strives to be a world-class operator, a responsible corporate citizen and a good employer.
2. Approach to tax risk management & governance
The approach of Bouygues in the UK to tax risk management and governance is to meet the three following key principles:
2.1 To comply with all statutory requirements
- We respect the law in the UK, our place of business. This means that we comply with our legal obligations for tax that we aim to file our tax returns on time with full and adequate disclosure of all relevant matters, and that we assess and pay our taxes on time.
- We do not take an aggressive approach to tax planning or compliance. This means that we will only undertake transactions that we are prepared to fully disclose, that have a strong underlying commercial motivation, and that are not artificial or contrived.
- We conduct intragroup transactions on an arm’s length basis and comply with our obligations under transfer pricing rules in the jurisdictions where we operate.
The Group’s approach is to comply strictly with local laws and strives to be tax compliant in each country where the Group operates.
2.2 Strong and robust governance at every level
The Group's approach is set out at the level of Bouygues SA, the Group’s parent company headquartered in France.
The Chief Executive Officer and Finance Director of each of the UK entities own and implement the Group’s Approach to Tax in the UK. The Finance Directors of the UK entities are also responsible for ensuring that policies and procedures that support the Group’s approach are in place, maintained and used consistently within the UK, and that the local tax teams have the skills and experience to implement the approach appropriately.
2.3 Minimising exposure to tax risk
Road, rail and roofing activities have a very high level of inherent commercial and operational risk. We therefore follow a detailed risk management system as part of our internal control processes at the level of the Group. As part of that, we identify, assess and manage tax risks and account for them appropriately. We implement risk management measures including controls over compliance processes and monitor their effectiveness, with the aim of continuous improvement.
As regards transfer pricing, the Bouygues Group has operations in the UK almost entirely within the Construction sector (road, rail and roofing activities). These operations are carried out locally within the UK, and have no material exposure to uncertainties relating to imports and exports. Therefore, Bouygues Group’s cross-border intercompany transactions to the UK comprise primarily management services rendered by the parent company and intermediate companies down the corporate hierarchy, brand licensing and occasional intra-group sales of assets. Their price is set on an arm’s length basis in accordance with OECD principles. These transactions including their pricing are reflected annually in our tax returns and supporting transfer pricing documentation.
3. Attitude towards tax planning
3.1 Operational driven approach
As stated above, the Group’s aim is to achieve its commercial and industrial objectives so as to create sustainable value on behalf of its stakeholders. We therefore only establish in a country such as the UK (whether through a one-time project or recurring business) if this is necessary to bring the best quality of service possible to the customers in the country considered and thereby achieve our commercial and industrial objectives.
- We do not use different jurisdictions to gain a tax advantage or otherwise engage in artificial tax arrangements.
- We adhere to relevant tax law and we seek to minimize the risk of uncertainty or disputes with local tax authorities. To that end, as part of our risk management process we seek where appropriate external tax advice to determine the appropriate application of rules.
We note that tax incentives and/or exemptions are sometimes implemented by the UK and other governments in order to support investment, employment and economic development. Where they exist we seek to understand their impact and, if appropriate, apply them in the manner intended.
The legal form and organization of the entities we have established in the UK were chosen to be suitable for carrying on our business activities, for complying with the prevailing regulatory environment, and sometimes to meet the requirements of our joint venture partners.
3.2 Global transparency
We recognise that there is a demand from public opinion in the UK and elsewhere for greater tax transparency. We aim to address this through clear and informative tax disclosures in line with OECD (Base Erosion Profit Shifting, action 13) and EU (Shareholders’ Rights Directive) proposals. Bouygues therefore reports information relating to income taxes in its Registration Document, such as the effective tax rate, a tax proof and total income taxes paid by the Group worldwide.
3.3 Responsibility to pay tax where the activity is carried out
Bouygues’s business operations take place wholly within physical locations and therefore we pay taxes where our activities are carried out.
4. Level of tax risk that the Group is prepared to accept
The Group does not engage in operations likely to bear an identified tax risk, whatever the economic benefit at stake. To that end, the Tax Departments of the Group proactively evaluate, manage and monitor potential risks to ensure they are properly eliminated as far as possible. Where a significant uncertainty or complexity arises, the Group’s tax Departments seek external advice and liaise with HMRC where appropriate.
Given the scale of the business and the volume of tax obligations, the Group’s tax positions may be challenged by Tax Authorities (potentially due to divergence of interpretation). In such cases, the Group’s Tax Departments ensure the Group’s interest is protected in accordance with the relevant legislation, published guidance and external advice.
Over and above its compliance with UK tax law, the Group does not undertake activities the tax implications of which might lead to reputational damage in the areas of business, investment and public opinion.
Where the Group operates through joint ventures, it will undertake its best efforts to ensure that this tax policy is adopted by the joint venture in order to minimise the level of tax risk taken on by the Group as a result of those operations.
5. The approach of the Group to dealings with HMRC
We seek to build and sustain relations with the UK Government, including HMRC, that are constructive and based on mutual respect. We work collaboratively wherever possible with HMRC to resolve disputes and to achieve early dialogue and agreement for certainty purposes. We do our best to respond appropriately and on time to HMRC requests for information regarding transactions or business processes.
More specifically, we are committed to having a regular and constructive dialogue with HMRC. This regularly includes advance discussion of transactions and keeping HMRC informed of key business developments, particularly those that could potentially impact our tax compliance obligations.