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.
The taxes AXA pays is an important part of its wider economic and social impact and plays a key role in the development of countries where it operates*. AXA regards it as a critical element of its commitment to grow in a sustainable, responsible and socially inclusive way.
AXA also squares its responsibilities as a co-operative, compliant taxpayer in each and every country in which it operates, with the need to support competitive business growth - serving all its stakeholders including investors, suppliers and employees.
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 while others are 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 operates. In addition to the Group Tax Department based in France, all key operational entities/countries/regions have a tax team in charge of ensuring that tax regulations are well understood and satisfied by the entities and in the appropriate geographic zones. In this respect, a bi-annual tax review process of each key entity or business line is formalized within the internal “Finance Professional Family Policies Manual” and performed by the Group Tax Department in connection with each local team.
As an international group operating in several countries, the AXA Group is subject to various tax regimes and regulations and takes 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 the AXA Group’s tax liability, return on investments and business operations.
The Group’s 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 “AXA Sanctions Policy” dated March 2015).
AXA has no licensed insurance or operating business activities in the countries specifically identified as non-cooperative jurisdictions under French domestic tax rules. In Panama which has been recently identified as such, AXA has been acting locally through two operating companies providing assistance services to local customers or travellers insured by AXA for several years.
The consolidated financial statements are prepared in compliance with IFRS standards (as disclosed in Note 1 “Accounting principles” in Part 5 – “Consolidated Financial Statements” of the Annual Report). 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 “Income taxes” in Part 5 – “Consolidated Financial Statements” of the Annual Report).
The Consolidated Financial Statements present the reconciliation between the theoretical tax charge and the effective tax charge under IFRS. All differences are fully explained (see Note 19 “Tax” in Part 5 – “Consolidated Financial Statements” of the Annual Report). It should be noted that in many jurisdictions where AXA operates, the income and capital gains on savings-products benefit from a favorable tax treatment, also when such products are included in life insurance products. 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 reports 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 Annual 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 Section 2.3 “Activity Report – Underlying earnings, adjusted earnings and net income Group share” of the Annual Report).
Profit (Loss) Before Income Tax (2016)
Income Tax Paid (on Cash basis) (2016)
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.
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 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 the AXA Group’s 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 Guidance dated 15 March 2012”, according to which any new cross-border offer must be presented to the Group Tax Department for its validation.
While all Group entities must in any case comply with local regulation, the Group Tax Department can veto a product if this product is not compliant with internal rules.
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...).