Repsol is in favor of transparency and opposed to any kind of corruption. The company has been a member of the Extractive Industries Transparency Initiative (EITI) from its inception. The EITI is the global initiative that we consider best placed to achieve the goal of increasing transparency within the context of respect for contracts and the law. Repsol provides the EITI secretariat with financial support and participates in its initiatives to spread good practice.
The EITI's priorities in 2010 were:
• To oversee the validation of 24 of the 28 candidate countries with a deadline of 2010. By the end of the year, only five of these had passed the process to become compliant countries.
• To support compliant countries in making progress towards implementation.
• To develop an EITI policy using lessons learned from the validation process.
• To promote the initiative in other countries.
Repsol and the EITI group in Peru
Repsol plays an active part in the EITI Group in Peru. In 2010, aside from reconciling the payments and revenue of the extractive industries, the way in which this public revenue is used was reviewed and analyzed as part of an EITI regional pilot program in the Cajamarca area.
The Lima forum, which took place in July 2010, brought an end to a period of public promotion of this initiative, which had started in March, and which involved actions in Moquegua Ancash, Loreto, Cusco, and Cajamarca. These promotional campaigns publicized the results of the national reconciliation study, presented at the end of 2009, explaining to the public how extractive industry companies make payments to the State, and the mechanisms that the State uses to receive these funds and distribute them to the regions.
On 14 December 2010, the EITI Council identified Peru as a country that is close to complying with the validation process, and it has been given six months, until 12 June 2011, to complete the corrective actions required in order to achieve compliant status.
|Taxes paid by country|
|Millions of euros||2010|
|Trinidad and Tobago||455|
|(48)||Excluding Gas Natural Fenosa.|
|(49)||Includes taxes of less than €100 million paid in other countries where the Repsol Group operates.|
More information about transparency, our involvement in the EITI initiative and the progress made by the EITI group in Peru is available at transparency.repsol.com
Repsol had contact with various civil society organizations throughout 2010 in the area of financial transparency.
• The company is involved in ongoing talks with a development NGO about providing specific financial information on a country-by-country basis, and has offered to provide detailed explanations and analysis of our activities in certain countries viewed as tax havens under Spanish legislation, and the rationale for these activities.
• Repsol accepted an invitation from the Publish What You Pay coalition, a group of global civil society organizations, to take part in a roundtable event held in collaboration with the Revenue Watch Institute to discuss individual countries? submissions to an International Accounting Standard Board's Discussion Paper, with a view to a possible future international accounting regulation for the extractive industry, which would update the current International Financial Reporting Standard, IFRS6.
• Repsol responded to a questionnaire from Transparency International related to transparency in the oil and gas sector. Repsol is the only company judged to be among the top 10 for the three sections evaluated in the study: information on anti-corruption programs; dissemination of information about the organization; and country-by-country reporting.
• Repsol YPF Ecuador took part in the international conference Transparency in the oil sector: new challenges and opportunities, which was held on October 21 and 22 in Quito. We participated in the 'Building Multisectorial Alliances' working group made up of government, civil society, and private companies working on the issue of transparency.
Payments made to governments
Taxes paid by the Repsol YPF Group in 2010(48) stood at €16,168 billion, of which approximately 49% comprised special taxes imposed on the manufacture and/or sale of hydrocarbons and 28% related to taxes withheld or passed on to third parties (such as withholdings on salaries and VAT).
As part of our commitment to transparency, in November 2010 Repsol signed the Code of Good Tax Practices, produced by the Large Business Forum and the Spanish Tax Agency. The aim of this initiative, promoted by the Spanish Government, is to encourage transparency, good faith, and cooperation with the Spanish Tax Agency (AEAT) in business tax practices and legal security in the application and interpretation of tax regulations.
Involvement in the European Commission register of interest representatives
In line with its firm commitment to transparency, Repsol joined the European Commission register of interest representatives at the start of 2011. This initiative aims to make transparent firms' lobbying activities. We provided the following information on 2010:
|Item||Description||Information provided by Repsol|
|Asociaciones y redesAssociations and networks||Information on the company's membership of any associations, federations or confederations, and its participation in any networks, as well as the nature of the links it has.||
Our primary memberships:
- Sectoral: Concawe, Europia, CEFIC(50), PlasticEurope, OGP(51) Europe, IETA(52), CEN(53) e ISOPA(54). - Business: ERT(55).
|Financial data||Estimation of costs related to direct interest-representation activities at European Institutions carried out by the entity this year:||Between €250,000 and €300,000.|
|Other financial data or supplementary clarifications provided by the entity for transparency purposes:||The amounts declared are our best estimates of expenditure related to direct lobbying activities, meetings, direct correspondence and involvement by our employees in preparing documents and in the working groups of various associations and think tanks. We take into consideration both the cost of the time invested and of any travel taken. We do not include membership fees, given that these are declared separately by the various associations.|
|Interest representation activities||Purpose of the main interest representation activities carried out by the company:||The main representation activities we carried out in Europe have been focused on European policies in the fields of energy, industry, environment, climate change, and foreign trade.|
|(50)||European Chemical Industry Council.|
|(51)||International Association of Oil and Gas Producers.|
|(52)||International Emissions Trading Association|
|(53)||Comité Europeo de Normalización.|
|(54)||European Isociante & Polyol Producers Association.|
|(55)||European Round Table of Industrialists|
In our business dealings, Repsol does not use special purpose vehicles or any other kind of structures to hide, cover up, or reduce the transparency of its activities before the tax authorities or any other stakeholder.
In particular, by signing up to the Code of Good Tax Practices, Repsol has expressly committed itself not to use opaque structures for tax purposes. Opaque structures are anything designed to prevent the tax administration from identifying responsible parties or owners of goods or rights, through the use of special purpose entities in tax havens or territories that do not cooperate with the tax authorities.
In support of this commitment, the company has been working actively over recent years to reduce its already limited presence in territories classified as tax havens or territories that do not cooperate with tax authorities. The Repsol Board of Directors, via the Audit and Control Committee, must always be notified of the creation or acquisition of stakes in entities domiciled in countries or territories considered to be tax havens.
Repsol's presence in territories included in the April 2009 OECD list of non-cooperative tax havens is limited to Liberia, where we carry out hydrocarbons exploration activities through a local branch office.
Spanish legislation(56) provides a broader definition of tax havens. By this definition, we have 10 active companies constituted in such countries, specifically Bermuda and the Cayman Islands. Out of these companies, only three are controlled by Repsol. Their purposes are insurance activities (Bermuda), financial activities (Cayman Islands), and industrial share holdings (Bermuda). In addition, four companies not constituted in tax havens have a presence in these countries, where they are involved in hydrocarbons exploration activities (Liberia, as mentioned previously), trading in oil products (Singapore), and industrial share management (Barbados). It is foreseeable that all of these apart from Liberia will soon no longer be considered tax havens, having negotiated or being in the process of negotiating information exchange agreements, or agreements to avoid dual taxation with the Spanish authorities.
Grants recorded in our balance sheet, which stood at €110 million and €124 million in 2010 and 2009, respectively, related primarily to construction of gas infrastructure (€80 million in 2010 and €108 million in 2009).
Our profit and loss account shows the corresponding income under the sub-heading including capital subsidies in the results. Meanwhile, the amount of operating subsidies recorded as yearly revenue under the sub-heading 'Other revenue' stood at €227 million and €192 million in 2010 and 2009, respectively.
Lawsuits arising from anti-competitive practices
Repsol faced no sanction procedures initiated in 2010 due to allegations of anti-competitive practices (excluding YPF). All the supplementary information on the contingent liabilities and commitments of the Repsol YPF Group for 2010 is detailed in Note 34 of the annual consolidated accounts of Repsol YPF, S.A.
Repsol, through its subsidiary Repsol Comercial de Productos Petrolíferos, is the only oil company that reached a commitment with the European Union to publish the expiry dates of the contracts binding service stations to Repsol.
Publishing these dates enables other market operators to submit bids for Repsol service stations approaching the end of their exclusive supply agreements, with the owner of the service station then being free to accept bids submitted either by Repsol or any of its competitors. This is therefore a means of encouraging and promoting competition in the Spanish service stations market.