In its tax footprint reporting, Posti adheres to the country-specific tax reporting guidelines for companies of which the state is the majority shareholder, provided by the Ownership Steering Department on October 1, 2014.
All companies in the Group have committed to operating responsibly and to meeting all obligations and requirements defined by the valid legislation of each country. Posti Group companies pay their taxes in the countries in which their actual business operations take place. All taxes are to be paid on time without delay. The Group’s long-term target is to ensure that the Group’s effective tax rate is at the same level as the corporate income tax rate valid in Finland at any given time.
According to the Group’s tax strategy, taxation is always a consequence of business operations, which means that tax solutions must also be based on business needs. Posti does not practice tax planning that would aim at artificially decreasing the Group’s taxable income. In tax-related issues, the Group operates within the framework of legislation and legal practice in planning the taxable profit of Group companies. This can include the utilization of tax losses accrued in a subsidiary or the granting of group contributions, for example. In transfer pricing between subsidiaries, Posti aims to always ensure that the prices are market-based. To clarify taxation practices, some situations may involve contacting the tax authorities for either verbal guidance or a written decision on the taxation treatment of the planned action.
Management of tax-related issues
The management of tax-related issues is centralized to the Group Finance unit, which is responsible for managing and monitoring tax-related issues at the Group level. Decisions related to taxation are made at the Group level. Significant matters of principle are presented to the parent company’s Board of Directors for decision-making. The Group’s CFO reports regularly on taxation-related issues to the Group’s Audit Committee. The key task of the management of tax-related issues is to ensure that all Group companies comply with the regulations of tax legislation in all countries of operation. Tax risk management is part of the Group’s risk management process.
Principles observed in tax reporting
Posti reports its tax footprint openly and transparently. The Group highlights potential decisions by the tax authorities and appeals concerning decisions by the tax authorities where such decisions and appeals have a material impact on the Group’s tax position.
The information presented in this report is based on information collected from the Group’s accounting systems. Taxes refers to taxes or tax-like fees paid to public sector entities, whether they are paid or remitted by the company. The nature and amount of taxes vary significantly from country to country. Taxes payable refers to taxes paid by the Group companies which are, as a rule, expensed in the company’s financial statements. Taxes remitted refers to taxes or fees collected by the companies which are remitted to tax collectors, often on behalf of parties other than the company itself.
The company has restricted its tax reporting to only cover substantial operating countries. Based on this decision, country-specific tax information is only presented for Finland and Russia. Approximately 85 % of Posti Group’s net sales come from these countries. According to the Group’s strategy, these countries are its main markets. Other operating countries are grouped under Scandinavia and Other countries. Posti also uses the same geographical categorization in its consolidated financial statements.
For countries other than Finland and Russia, information is presented on a country group-specific basis as the information reported is not of material importance and the presentation of country-specific information might jeopardize the non-disclosure of confidential information, such as customer or pricing details. From the Group’s perspective, the amount of information reported is not of material importance when the taxes payable for an individual country do not exceed EUR 5 million.
The Group operates in 11 countries. In addition, Posti has companies in countries where the Group no longer has business operations. When assessing the materiality threshold, net sales of EUR 1 million for each individual subsidiary is considered the threshold for non-materiality. Non-material companies are excluded from the reporting, as the amount of taxes paid by the companies is minor in proportion to the figures disclosed by the Group. These companies are in the categories Scandinavia and Other countries. Posti does not have any operations or companies in countries classified as tax havens, where the corporate income tax rate is significantly lower than the Finnish corporate tax rate. The information presented below is based on the financial statements of separate companies and the information has not been consolidated.
The Group’s tax position in 2017
In 2017, the Group’s effective tax rate was -20.0 % (2016: 21.5%). The effective tax rate is calculated based on accrual-based income taxes and changes in deferred taxes. The increase in the tax rate was significantly affected by non tax-deductible losses on the impairment of goodwill and the disposal of sold business. The Group’s accrual-based income taxes for the financial year, excluding the effect of changes in deferred taxes, amounted to EUR 7.0 million.
Posti Group Corporation has several pending appeals lodged with the Board of Adjustment in the Large Taxpayers’ Office. The appeals are mainly related to the utilization in Finland of losses recognized by foreign subsidiaries that were merged into the company in 2014 and 2015. The losses amount to approximately EUR 59 million in total. The appeals are still pending in the Board of Adjustment.
Posti Group’s Finnish companies were subject to a tax audit in 2016 and 2017. According to the audit reports, the Group’s Finnish companies are liable to pay approximately EUR 0.3 million in value added taxes, penalty interest and punitive tax increases. Posti considers the majority of the observations made in the audit reports to be unsubstantiated and erroneous, and Posti has lodged an appeal with the Board of Adjustment in the Large Taxpayers’ Office.