Taxation policy, tax borne by country, tax collected

Stora Enso Oyj – Annual report – 31 December 2022

Industry: forestry, manufacturing

Stora Enso’s tax footprint

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.

Tax policy

The Stora Enso Tax Policy addresses Stora Enso’s tax strategy, including approach to tax, tax governance, compliance, tax risk management and tax authority co-operation. The Tax Policy has been approved by the CEO of Stora Enso and is reviewed annually. This report summarises the principles of the Tax Policy.

Tax approach

As a responsible and prudent taxpayer, Stora Enso is committed to ensuring that the Group observes all applicable tax laws, rules and regulations, including international transfer pricing guidelines and local legislation in all jurisdictions where it conducts business activities or has otherwise any tax obligation. In addition to legal and regulatory requirements, the tax principles comply with Stora Enso’s values to ‘Do what’s right’ and ‘Lead’.

The strategic priorities of Stora Enso’s tax function are confirmed annually by the Group CFO. Integrated business partnering and inspired people with the right skills are at the core of Stora Enso’s tax strategy. This is the basis for ensuring tax compliance with streamlined processes and advanced technology, and facilitating an early detection of tax risks, regulation changes and improvement opportunities.

Stora Enso seeks to ensure that the tax strategy is aligned with the Group’s business and commercial strategy. Stora Enso only undertakes 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 one of many other factors that are taken into account when making business decisions. As with any other business expense, however, Stora Enso has an obligation to manage tax costs as part of the company’s financial  responsibility to societies and shareholders. Stora Enso is therefore willing to respond to tax incentives and exemptions granted by governments on reasonable grounds, and currently has 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 Stora Enso’s related industrial company is entitled to reduced corporate income tax rate until 2025. Stora Enso has in December 2022 initiated a sales process for a possible divestment of these forestry and consumer board production operations.
  • Stora Enso conducts business, mainly consisting of sales services, in the United Arab Emirates, Singapore and Hong Kong.
  • AS Stora Enso Latvija has been granted a corporate income tax credit relating to an investment project. The credit is available for utilisation against tax arising on profit distribution in future years.

Tax governance, control and risk management

As part of protecting shareholder value, Stora Enso acts with integrity in all tax matters. The Group’s 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. In addition to performing the mandatory group-level tax disclosure processes, the Tax team consolidates annual and quarterly tax reporting describing the Group’s tax position to shareholders and other stakeholders. The Group’s Tax team regularly reports key tax matters to the Group Leadership Team and the Finance and Audit Committee of the Board of Directors.

Tax affairs are managed under an extensive set of Group policies, like Stora Enso Code, Business Practice Policy, Supplier Code of Conduct, and Tax Policy. Stora Enso’s internal allocation of responsibilities of tax matters and the engagement of external resources are described in the internal Tax Responsibility Guidelines. Internal stakeholders are continuously trained on tax-related matters in order to enhance capabilities and improve overall tax compliance and quality of tax reporting. Compliance processes are subject to internal controls, and tax risks are annually reviewed as part of the Group’s Enterprise Risk Management process. 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 risks with stakeholders to ensure that Stora Enso can sufficiently identify, assess and mitigate tax risk.

In case employees have any concerns about unethical or unlawful behaviour or the company’s integrity, the Speak Up Hotline can be used to report any suspected cases also regarding tax matters. All reported cases will be subject to an established investigation and reporting process, with proven cases leading to actions.

The Group’s tax disclosures are included in the assurance process of the Annual Statements. The tax footprint report is subject to limited assurance.

Stakeholder engagement and concerns related to tax

Stora Enso’s commitment to tax transparency is also reflected in the Group’s relationships with tax authorities and governments. To build confidence whenever possible, Stora Enso seeks to work positively, proactively and openly with tax authorities on a global basis, utilising transparent advance processes in order to minimise disputes. Stora Enso also works with government representatives, mainly through associations, by providing corporate views and impacts at request to aid law-making and implementation. Stora Enso readily responds to investor enquiries, and constantly follows the development of tax sustainability and transparency expectations.

Stora Enso’s tax footprint in 2022

In 2022, Stora Enso paid EUR 1,251 million (1,184 million) in taxes to governments in countries where the Group has operations. A total of EUR 479 million (435 million) was paid directly by the Group (taxes borne) while EUR 772 million (749 million) was collected on behalf of governments (taxes collected). At the end of 2021, Stora Enso had EUR 274 million tax losses in Finland. At the end of 2022, there were no material tax losses related to Finland, and the Group will be in a tax paying position in Finland in 2023. 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, for example, 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 the tax footprint calculations.