Below are the AXA Group Tax Principles which have been included in the AXA Group Annual Report for tax year 2014 (pages 153 to 155). Both as a multinational company and as a provider of investments and savings products, the AXA Group follows a responsible and transparent approach on tax issues.
In the countries where it operates , AXA is both a taxpayer and a tax collector, given that many specific taxes are levied on insurance policies and collected from our customers as part of the insurance and asset management revenues and remitted to the various state and federal administrations around the world.
The tax function is organized within the Group to ensure full compliance with all tax legislations in the countries where AXA is operating. In addition to the Group Tax Department based in France, all key operational entities/countries/region have a tax team in charge of ensuring the tax regulations are well understood and satisfied by the entities. In this respect, a biannual tax review process of each key entity formalized within the internal "Finance Professional Family Policies Manual" is performed by Group Tax Department in connection with each local team.
As a global company operating in several countries, the AXA Group is subject to various tax regimes and regulations and is taking into account any changes in tax law. AXA is specifically vigilant about the changes that could result in higher tax expenses and payments, higher compliance costs or that may affect AXA Group's tax liability, return on investments and business operations.
The Group policies and procedures with respect to business in or with countries that are "tax havens", subject to international sanctions or embargoes, or are otherwise identified as high corruption or high political risk are formalized in an internal policy drafted by the Group Compliance Department (entitled "Policy on business relationships involving sanctioned countries and countries identified as having high levels of corruption or political risk").
AXA has no licensed insurance or operating business activities in the countries specifically identified as non-cooperative jurisdictions by the French tax authorities in accordance with the provisions of Article 238-0 A of the French tax code.
The consolidated financial statements are prepared in compliance with IFRS standards (as disclosed in Note 1 of Section 4.6 "Notes to the Consolidated Financial Statements"). Accounting for income taxes recognizes both the current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the carrying amount of the entity's assets and liabilities, as required by IAS 12 (see Note 1.17.1 of the same Section).
The present report discloses the reconciliation between the theoretical tax charge and the effective tax charge under IFRS. All differences are fully explained (see Note 19 of Section 4.6). It is worth highlighting that in many jurisdictions where AXA operates, the income and capital gains on savings products, including when they are included inside life insurance contracts, benefit from a favourable tax treatment. This leads to a lower effective tax rate for life insurance companies. Over the last several years, and notably following the financial crisis, this difference has trended down.
In addition to the details reported around the Group effective tax rate, AXA is reporting substantial information on the impacts of any change in local tax regulations on its business, as well as details of the tax burden per line of business and per country. AXA's income tax expenses/benefits are extensively disclosed in the present report and are broken down by business segment and country. For each, a dedicated paragraph provides a comment about the line related to Tax Income (see "Consolidated underlying earnings, adjusted earnings and net income" in Section 1.3 " Activity Report").
The Group's activities are subject to strict regulations and rigorous control in each territory in which AXA operates. In addition to these regulations, AXA has developed a set of detailed internal standards that applies to all Group entities that are managed or controlled by AXA, regardless of the activities undertaken by the entity or its ownership structure.
According to these internal standards, local senior management must appreciate the tax implications of the activities in their entity. The main considerations are:
A specific focus on transfer pricing items is done in application of these standards. In particular, Chief Financial Officers must ensure that (re)insurance policies entered into represent a true transfer of risk and that their status as (re)insurance contracts could not be subject to challenge. Business between Group companies must be transacted at market prices where a market price exists, or in the absence of market prices, must be supported by formally documented justification for the charge made.
AXA's products are not designed to allow or encourage tax evasion. The Group has set up a validation framework to ensure that new products undergo a thorough approval process before they go to market.
The local decision to launch a new product must result from a documented approval process that complies with AXA Group standards in terms of product features, pricing, Asset- Liability Management and aspects related to legal, compliance, regulatory, accounting and reputation. Moreover, AXA has established strict policies regarding its cross-border activities and knowledge of its customers, in order to ensure that our products and services are not misused for money laundering or tax evasion purposes. Cross-border tax issues are addressed with a specific "Cross Border Business Group Standard", according to which any new cross-border offer must be presented to the Group Tax Department for its validation.
While all AXA entities must obviously comply with local regulation, the Tax Department can veto a product if this product is not compliant with internal rules.
AXA Group reports extensively, within its Annual Report, on its effective tax rate on group level and provides a detailed explanation for this rate. Download the extract here.
AXA Group is really focusing on preserving its reputation. Therefore, tax risks are managed in such a way not to impact the Group reputation as a responsible tax payer which implies :
In addition, AXA Group provides when necessary and relevant detailed information on direct and indirect risks for both its customers and itself which includes taxation. As an example, any increase in taxes which impact negatively the economy and the activity is monitored carefully and detailed when the consequence for the Group can be material. Same comment for any new tax voted in a country where the Group operates.
As a more general observation, AXA Group is monitoring carefully any potential changes around the tax regime of the life insurance activity, or any specific tax reform which can have an impact on the Group tax position and its activities (deletion of tax consolidation, increase in VAT rates...).