At Ahold Delhaize, we seek to make a positive impact in the communities where we operate and be a good neighbor. One way we do this is by paying taxes in a way that takes into consideration social and corporate responsibility and the interests of all our stakeholders. Our overall tax approach is in line with Ahold Delhaize’s Business Principles, Healthy and Sustainable strategy and Code of Conduct.
Our tax policy consists of five main tax principles: transparency, accounting and governance, compliance, relationships with authorities and business structure. Our tax principles are aligned with the B Team responsible tax principles.
We are proud of the fact that by paying our share of taxes in the countries where we operate, we contribute to economic and social development in these countries. Also, with our total tax contribution, we support the UN Sustainable Development Goals.
In 2020, Ahold Delhaize collected and paid many types of taxes: payroll tax, corporate income tax, net-value-added tax (VAT), sales and use tax (S&U), property tax and real estate tax, dividend tax, excise and customs duties and others (e.g., packaging tax).
For more details on our corporate income tax financial position see Note 10 to the consolidated financial statements in our Annual Report 2020. The corporate income tax payments reported per country are summarized below.
For Belgium, the income tax paid in 2019 and 2020 was impacted by available operating losses carry forward, which were (partly) offset by taxable income. Other Europe included a tax payment in 2020 of €16 million, related to a tax claim. This claim is being disputed by Ahold Delhaize and we will continue to defend our tax position in this matter.
Our effective income tax rate (ETR) over 2020 was 19.4%. This is our worldwide income tax expense for the financial year 2020 amounting to €331 million, shown as a percentage of the consolidated income before income taxes. In 2020, Ahold Delhaize recorded a $1.7 billion (€1.4 billion) tax deductible expense for incremental pension liabilities due to withdrawal and settlement agreements of several U.S. multi-employer plans as explained in Note 24 to the consolidated financial statements in our Annual Report 2020. These incremental pension liabilities reduced our U.S. earnings before tax, significantly impacting the effective tax rate. When we exclude these incremental pension liabilities, our reported effective tax rate increases from 19.4% to 23.0% on a pro forma basis.
Accounting and governance
Ahold Delhaize has a well-equipped and professional Tax function. This function reports directly to the CFO and has direct access to the Management Board and the Supervisory Board. At least once a year, a tax update is presented to the Audit and Finance Committee of the Supervisory Board. The global tax policy is approved by the Management Board.
Our tax risk appetite is based on Ahold Delhaize’s overall compliance-related risk appetite, which is very low. We recognize the risk that non-compliance with applicable tax laws and regulations could result in damage to Ahold Delhaize’s reputation or to the relationship with our host countries. For more information, see the How we manage risk section in our Annual Report 2020.
To assess and control tax risks, we have a “Tax Control Framework” in place. Tax controls resulting from risk assessment exercises are defined, implemented and tested by various monitoring functions – comprising senior management and the Risk & Controls (second line of defense) and Internal Audit teams – making use of specific Ahold Delhaize tools developed for this purpose. Based on the annual internal audit plan, selected taxes and/or jurisdictions are audited. This results in an audit report rating the design and operating effectiveness of the tax controls.
Each quarter, our brands approve a letter of representation, which includes a confirmation on the accuracy and completeness of our tax position. We have a tax strategy in place that is proactively communicated throughout the company and we organize training for selected brands and jurisdictions, during which the Tax Policy and its main principles are explained in the form of tax risk workshops.
Ahold Delhaize associates have access to a whistle-blower line for reporting any ethical or compliance concerns related to company practices, including tax matters.
We are also actively involved in the field of tax technology and have drafted a global tax technology strategy and roadmap to track and trace improvement projects and monitor future digital tax developments. We currently have various initiatives underway within our direct as well as indirect tax disciplines to optimize and upgrade our tax processes. We closely align with broader finance implementations and the IT function assists us with our tax technology projects. The Ahold Delhaize-wide implementation of a new core finance system will be an important enabler of our tax technology roadmap.
Our tax compliance is based on the following examples of good tax practices:
• We aim to file our taxes in full compliance with local laws and regulations.
• We base our tax compliance on a reasonable and responsible interpretation of tax laws.
• We aim to comply with the spirit as well as the letter of the law.
• We attempt to discuss and clarify uncertainties about the tax treatment upfront with the tax authorities.
• We only seek rulings from tax authorities to confirm the applicable treatment of laws and regulations based on full disclosure of the relevant facts.
• We only make use of tax incentives when they are aligned with our business and operational objectives, follow from the tax law and are generally available to all market participants.
Relationships with authorities
Ahold Delhaize engages with tax authorities based on mutual trust, and we seek open and transparent working relationships with them. We provide the tax authorities with any information they require within a reasonable timeframe. This helps both the tax authorities and Ahold Delhaize to foster timely and efficient compliance. In the Netherlands, we concluded a covenant (horizontal monitoring) with the Dutch tax authorities in 2005. In 2021, this will convert into an individual monitoring plan. In Belgium, we are entering a cooperative compliance program with the tax authorities.
As a company close to society, we value constructive dialogue regarding taxes with the governments in the countries where we operate and respond to government consultations on proposed changes to legislation, with the aim to achieve sustainable legislation.
We have a physical presence in all jurisdictions and we follow internationally accepted norms and standards (Organisation for Economic Co-operation and Development/Action Plan on Base Erosion and Profit Shifting/European Union). Our tax decision-making process is based on the following examples of good tax practices:
• We do not transfer value created to jurisdictions listed on the EU list of non-cooperative jurisdictions for tax purposes (the EU “blacklist”) updated by the Council of the European Union on October 6, 2020, or jurisdictions listed on the Netherlands’ blacklist published in the Government Gazette on December 31, 2020 (low-tax jurisdictions).
• We pay tax on profits according to where value is created within the normal course of business.
• We base our transfer pricing policy on the arm’s length principle.
• We do not use opaque corporate structures or those situated in low-tax jurisdictions to hide relevant information from the tax authorities.
• We do not have businesses in countries listed in low-tax jurisdictions.
• We are transparent about the entities we own (see Note 35 to the consolidated financial statements in our Annual Report 2020).
• We will not engage in arrangements, with any employee, customer or contractor whose sole purpose is to create a tax benefit in excess of what is reasonably understood to be intended by relevant tax rules.