Taxation policy, tax borne by country, tax collected

Stora Enso Oyj – Annual report – 31 December 2021

Industry: forestry, manufacturing

Stora Enso as a taxpayer

Stora Enso’s operations generate value through taxes for governments around the world. In 2021, Stora Enso paid again approximately EUR 1.2 billion into public sectors, including EUR 749 million in collected taxes.

Stora Enso aims to be transparent with respect to economic value generation. For this purpose, Stora Enso makes a voluntary commitment to openly provide details of the taxes paid by the group to governments in its main countries of operation. This commitment to our stakeholders is fully in line with Stora Enso’s values to ‘Do what’s right’ and ‘Lead’.

Stora Enso’s tax policy

Stora Enso’s tax policy is approved by the CEO and is reviewed annually, with updates as necessary. As a responsible and prudent taxpayer, Stora Enso is committed to ensure that the group observes all applicable tax laws, rules and regulations in all jurisdictions where it conducts its business activities. Stora Enso follows international transfer pricing guidelines and local legislation. In addition to our legal and regulatory requirements, our tax principles comply with our values. Furthermore, we seek to ensure that our tax strategy is aligned with our business and commercial strategy. We only undertake tax planning that is duly aligned to economic activity. This means that all tax decisions are made in response to commercial activity, and tax is only one of many factors that are taken into account when making business decisions.

As with any other business expense, however, we have an obligation to manage our tax costs as part of our financial responsibility to societies and shareholders. We are therefore willing to respond to tax incentives and exemptions granted by governments on reasonable grounds, and we currently have operations in countries that offer favourable tax treatments, where their location is also justified by sound commercial considerations.

Stora Enso has operations in the following locations that offer favourable tax treatments:

  • The joint operation Montes del Plata operates a pulp mill in a Special Economic Zone in Uruguay.
  • Stora Enso’s two forestry companies in Guangxi, China are entitled to exemption from corporate income tax from forestry income and value added tax on their sales, and our related industrial company is entitled to reduced corporate income tax rate until 2025.
  • Stora Enso conducts business, mainly consisting of sales services, in the United Arab Emirates, Singapore and Hong Kong.
  • For logistical and operational reasons, pulp from the group’s joint operations in Brazil and Uruguay is traded via a pulp sourcing and marketing company based in the Netherlands.
  • AS Stora Enso Latvija has been granted a corporate income tax credit relating to an investment project. The credit is available for utilization against tax arising on profit distribution in future years.

Our commitment to tax transparency is also reflected in our relationships with tax authorities and governments. We seek to work positively, proactively and openly with tax authorities on a global basis, aiming to minimise disputes and to build confidence wherever possible. We also work with government representatives, mainly through associations, by providing corporate views and impacts at request to aid law-making and implementation.

The Stora Enso tax team, reporting to the group CFO, works closely with the businesses and other internal stakeholders to identify and manage business and compliance tax risks to ensure a sustainable yet business feasible platform for operations. Internal stakeholders are continuously trained on tax related matters in order to enhance capabilities and improve overall tax compliance and tax reporting position of Stora Enso group. The tax team is involved in business changes already in the planning phase to ensure the alignment and appropriate compliance of tax rules and regulations. Tax team monitors changes in tax legislation and regularly reviews tax affairs and risk management procedures to ensure that Stora Enso can identify, assess and mitigate tax risk. As part of protecting shareholder value, we act with integrity in all tax matters and accurately report the Group’s tax position to our shareholders and other stakeholders.

Stora Enso’s tax footprint

In 2021, Stora Enso paid EUR 1,184 million (980 million) in taxes to governments in countries where the group has operations. A total of EUR 435 million (369 million) was paid directly by the group (taxes borne) while EUR 749 million (611 million) was collected on behalf of governments (taxes collected).

Stora Enso paid only a small amount of corporate income taxes in Finland in 2021 because of tax losses carried forwards from previous years. The tax losses of EUR 274 million (329 million) carried forward in Finland are the result of several factors including high closure and restructuring costs incurred in the past.

All companies within the scope of Stora Enso’s tax footprint are consolidated or joint operations, which have been consolidated proportionally with Stora Enso’s share amounting to at least 50%. Consolidation includes all companies that have either at least 10 employees or a turnover of EUR 5 million or above.

If a Stora Enso company was in a recovery position regarding VAT or energy taxation in a specific country, tax payments for this company have been reported at NIL.

Taxes borne include all tax and tax-like payments that Stora Enso has paid as own  taxes. Tax-like payments include other forms of government revenue raised outside of the tax regime, such as payments for emission rights or social security payments.

Taxes collected include all tax and tax-like payments that Stora Enso has collected on behalf of the government, including e.g. payroll taxes as well as VAT and similar sales-related taxes paid by Stora Enso. The economic burden for such taxes ends up with the buyer or final consumer.

Stora Enso’s tax footprint figures also reflect governmental incentives granted in the form of reduced tax rates or tax exemption, by reporting lower tax payments. However, governmental support is often granted in the form of subsidies, particularly in relation to energy consumption or favoured investments, which are not considered in our tax footprint calculations.

Taxes paid in major countries of operation