2018 Tax Strategy

Tax Governance

 

Tax is managed by an integrated team of tax specialists reporting to the Global Chief Financial Officer. They deal with Tax Compliance, Tax Accounting & Reporting, Indirect Tax, Corporate Tax Audit, and Transfer Pricing.

Local risks are managed within the European region via an “Operational Risk Matrix,” which considers the specific tax risks arising in the UK and determines how to mitigate those risks.  This risk matrix is managed and controlled by the Senior Accounting Officer of the UK Group.

The Head of Tax meets the entire Board of Directors formally once a year to discuss tax issues that are relevant to the worldwide group including the UK.  He presents details of relevant worldwide tax developments, tax audits and tax controversy. This meeting will also be attended by the Group’s General Counsel and the Statutory Auditors.

Tax Risk Management

Tax compliance and reporting risk.

This risk is managed by:

  • ensuring that there are appropriately qualified and experienced employees in the tax function
  • putting processes and procedures in place that mitigate risk
  • using external advisors for review

Changes in tax legislation

The Group actively monitors new tax legislation and any changes of interpretation of existing legislation as part of the management of its estimated effective tax rate throughout the year. It seeks external assistance from professional advisors and clarification from H M Revenue & Customs where necessary and appropriate.

Reputational risk

Mastercard has adopted a Code of Conduct and other internal policies and guidelines intended to support its mission statement and to comply with the laws, rules and regulations that govern its business operations. The Code applies to all directors, officers and employees of Mastercard. In addition, it has adopted a Supplemental Code of Ethics applicable only to the President and CEO, the Chief Financial Officer, the Controller, and certain other senior officers of the US Parent company, including those who serve in financial accounting, treasury, tax and legal advisory roles. Based on management reports, the Audit Committee monitors compliance with the Code, the Supplemental Code of Ethics and other internal policies and guidelines.
Mastercard’s published Code of Conduct affirms that it believes that “acting ethically and responsibly is not only the right thing to do, but also the right way to do business”. The Code of Conduct applies to Mastercard employees around the world. Abiding by the standards and procedures outlined in the Code and related policies is a condition of continued employment with the Company.

Cross-border transaction risk

Mastercard UK affiliates engage in intercompany transactions, some of them with entities outside the UK. Most locations where Mastercard affiliates operate have implemented income tax legislation explicitly requiring that intercompany transactions be conducted according to arm’s length standards and that materials be prepared (i.e. transfer pricing documentation) to demonstrate compliance in this regard.

All intercompany transactions require both economic substance and business purpose in order to be approved and implemented. Mastercard pays taxes in locations where it maintains business operations and employs people; the selection of such locations depend on several criteria, including: business climate, the strategic importance of the market, availability of a skilled workforce, and availability of office space, among other factors. Mastercard does not maintain a nominal presence in any jurisdiction simply for the purpose of taking advantage of a low statutory tax rate.

Merger & Acquisitions risk

The Merger & Acquisitions team involves the tax team from the beginning of any project. The tax team is involved in any necessary tax due diligence and the overall deal process.  Furthermore, tax is a separate workstream in any integration process. No entities are disposed of or liquidated without the involvement of the tax team.

Tax risk appetite and attitude to planning

 

Mastercard’s Board actively oversees the company’s risk and risk management practices, focused on fostering a risk-aware culture while encouraging thoughtful risk taking.

It is Mastercard's stated policy that it will never create a nominal presence in a particular jurisdiction simply to take advantage of a low tax rate.

Tax issues or expenses that may be conducive to planning are identified. The process of identifying tax issues takes place through the required involvement of a member of the Tax Department in the early stages of all major business transactions and through the constant review of all tax payments.

Internal and/or external resources are used to propose a potential tax solution. The Tax Department will meet with the appropriate people (i.e., internal business owners, Legal, Treasury, Accounting, Budget, Human Resources, and IT personnel and, if necessary, outside auditors and tax advisers) to determine the viability of any solution and to assess any non-tax risks. The Tax Department assesses tax risks, utilizing outside counsel when appropriate. Memoranda, presentation and computational materials are developed throughout the process. If necessary, an opinion of outside counsel is requested.

 

 

Working with HM Revenue & Customs (“HMRC”)

As a “large business” within the UK, Mastercard has been allocated a Customer Relationship Manager (“CRM”) by HMRC. CRMs manage the relationship with around 2,000 of the largest and most complex UK businesses to improve the handling of issues.  They use a risk assessment model to assess taxpayers against a published framework so that they can allocate resources to the highest risk taxpayers. 

The primary role of the CRM is to manage the relationship between the business and HM Revenue and Customs (HMRC) across all taxes and duties. This role includes being responsible for:

  • preparing an integrated risk assessment for the business
  • sharing the HMRC view of risk with the business - aiming to both identify and resolve any differences of view and to involve the business in planning future interventions
  • ensuring interventions (for example, enquiries and systems audits) fully reflect the risks of the business
  • ensuring interventions are carried out effectively and proportionately, making appropriate use of the range of specialist resource available within HMRC
  • ensuring issues are resolved in line with HMRC’s litigation and settlement strategy
  • managing responses to queries and clearance requests from the customer to ensure they are handled in a timely fashion so HMRC meets agreed deadlines and
  • keeping the business informed about how issues are progressing and why some may take longer to deal with due to their complexity or difficulty

Mastercard aims to work co-operatively with HMRC to ensure that they are aware of business developments in real time, subject to any confidentiality issues. In particular, they will aim to discuss any significant corporate restructuring. It is Mastercard’s aim to fall within a low risk category wherever possible whilst accepting that there may be differences of view (or ‘disputes’) between HMRC and Mastercard in relation to certain technical issues.

Mastercard’s UK Tax Strategy is published in compliance with paragraph 16(2) of Schedule 19 to Finance Act 2016

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