Integrated report 2019
Exxaro Resources Limited
Tax report for the year ended 31 December 2019
As a group, we are committed to complying with the code of corporate practices and conduct set out King IV. In terms of this code, Exxaro is responsible for the governance of risk management, including tax risk management.
It is the responsibility of the board (and audit committee) to manage tax risks. Operationally, the group tax manager is accountable for this function. The group tax manager reports directly to the group finance director. This is a change from the prior year when the tax function reported to the group manager: risk, compliance and assurance. The board has restructured the role of the group manager: risk, compliance and assurance to segregate the duties of a risk and compliance manager (now reporting directly to the chief executive officer) from that of the assurance manager, now called the chief audit officer.
The corporate tax function is organisationally and physically separated from the finance function and centralised at Exxaro's head office. It is currently not responsible for tax compliance, control and management of indirect taxes such as VAT and PAYE but plays an advisory role when required. The compliance, control and management of the VAT function will move to the corporate tax function in 2020.
The group tax manager reviews the tax implications of the projects presented at the investment review committee and executive management committee meetings to ensure the Exxaro tax function is informed of all transactions at inception phase, particularly decisions that can significantly affect the business. This is to ensure effective tax planning and tax risk management, resulting in operational cost savings.
The Exxaro tax function has formally documented its TRM framework, which was approved by the board in 2017. Significant changes are reported as required and the framework is updated regularly. The TRM framework was updated in 2019 and the only significant change is in the organisational reporting lines discussed above.
The group tax manager is responsible for implementing and monitoring compliance with controls and procedures as prescribed by the framework, as well as identifying, analysing and evaluating the impact of events and associated risks on the group's strategic objectives.
It is important to keep the board, audit committee, executive management, and other internal and external stakeholders abreast of tax risk management activities. Risk reporting is driven by stakeholder expectations and requirements as well as Exxaro's objective of open and transparent reporting.
The group tax manager reports to the audit committee quarterly on:
Transfer pricing policies for all offshore transactions with connected parties are maintained. The Exxaro tax function follows group document-retention policies and uses the SARS e-filing system as an additional document database. Long-term contracts are in place with expert tax advisers to assist the small tax team in applying for government grants and incentives to maximise tax benefits.
Internal and external assurance is performed on TRM processes on an ad hoc or rotational basis to provide an objective independent appraisal of the effectiveness of the framework and processes. The effectiveness of the tax pack for return and reporting purposes was tested during the year and no audit findings were reported by the internal auditors.
The group tax manager follows Exxaro's recruitment policies and ensures tax staff are adequately qualified with the necessary skills and experience demanded by each position's roles and responsibilities.
Training and formal postgraduate studies are encouraged and financially supported. In-house and external training courses and seminars on tax and accounting by reputable suppliers are regularly attended. A formal individual development programme is in place for all tax staff.
Tax staff are evaluated by the group tax manager on their commitment to risk management in their personal performance appraisals.
Bonus and share option schemes are tools to retain tax staff and to reward performance excellence. Non-performance is addressed through Exxaro's group human resource practices.
