Glencore : 2021 Payments to Governments Report

Payments to Governments Report

2021

Our approach |  Our contribution |  Our payments to governments	|  Additional information
Overview of payments to		Chief Financial Officer's		Our approach to			External engagement
governments made in 2021		introduction		tax and transparency

Welcome to Glencore's 2021 Payments to Government Report. This report aligns with the reporting requirements of Chapter 10 of the EU Accounting Directive. It also includes our commodity trading payments made to state-owned enterprises in Extractive Industry Transparency Initiative- implementing countries for the purchase of oil and gas and minerals and metals.

Further information on our approach to transparency, including the disclosure of the beneficial owners of our independently- managed joint ventures, a list of entities where the Group owns more than 20% interest, and our active marketing sales/ purchase agents, is available at:

glencore.com/who-we-are/transparency

During 2021, we made payments to governments of US$3,942 million, calculated in line with the requirements of the EU Accounting Directive

Amounts in US$ '000

• Argentina $743
• Australia $1,181,331
• Bolivia $12,326
• Cameroon $28,525
• Canada $207,799
• Chad $4,375
• Chile $444,112
• Colombia $43,783
• Democratic Republic of Congo $560,777
• Equatorial Guinea $158,279
• Kazakhstan $336,055
• Peru $684,197
• South Africa $273,970
• United States $131
• Zambia $5,490

Our total payments to government were around US$7.6 billion in tax, royalty and levy payments during 2021.

Our approach

Overview of payments to governments
made in 2021	02
Chief Financial Officer's introduction	03
Our approch to tax and transparency	05
External engagement	06
Our contribution
How we contribute	07
Contributing to the economy of Australia	08
Contributing to the economy of Canada	09
Contributing to the economy of the DRC	10
Contributing to the economy of Kazakhstan	11
Contributing to the economy of Peru	12
Contributing to the economy of South Africa	13
Our payments to governments
Payments by countries	15
Payments by government	16
Payments by project	19
Payments by region and commodity	22
Extractive Industries Transparency Initiative	23
Material advances and loans	29
Additional information
About this report	31
Appendix One - Group Tax Policy	31
Appendix Two - Detailed country disclosures	33
Glossary	35
Important notice	36
Further information	37

Find out more

glencore.com/sustainability

Glencore Payments to Governments Report 2021

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Our approach |  Our contribution |  Our payments to governments	|  Additional information
Overview of payments to		Chief Financial Officer's		Our approach to			External engagement
governments made in 2021		introduction		tax and transparency

Chief Financial Officer's introduction

During 2021, our total payments to governments were around US$7.6 billion in tax, royalty and levy payments.

I am pleased to introduce our annual Payments to Governments report, which aligns with the reporting requirements of Chapter 10 of the EU Accounting Directive.

Through our activities as one of the world's largest resource companies, with a presence at multiple stages of the commodity supply chain, and the payments we make to governments, we enable governments to realise value from their natural resources. Funds raised by governments from tax, royalty and levy payments can be used to finance public services, infrastructure and to invest in initiatives to improve the quality of life for their people.

Resolutions with US, UK and Brazilian

Authorities

In May 2022, we announced that we had reached coordinated resolutions with authorities in the United States, the United Kingdom and Brazil of previously

Steve Kalmin, Chief Financial Officer disclosed investigations into past activities in certain Group businesses related to

bribery, and separate US investigations related to market manipulation. Glencore cooperated with these investigations*.

These investigations identified serious cases of past misconduct in parts of our business. We acknowledge this is unacceptable behaviour that has no place in the Glencore of today.

We are committed to operating ethically and responsibly in all aspects of our business. We are determined to foster a culture of integrity, inclusivity and transparency wherever we operate, and at every level of Glencore.

We have invested significant resources to develop our Ethics and Compliance Programme. That work began before we knew of the investigations, and we are committed to continuously improving our programme.

Our commitment to fiscal transparency

We understand the detrimental impact of corruption on the capacity for regions and nations to fully realise rights and benefits due to them from resource development. We support efforts to combat corruption including through transparency initiatives.

We are strongly supportive of fiscal transparency, recognising the role it plays in encouraging the responsible management of revenues from extractive activities.

Glencore has been an active supporter of the Extractive Industries Transparency

Initiative (EITI) since 2011 and we engage with the EITI at both local and international levels.

We acknowledge that we were a member of the EITI during the period when certain of the serious misconduct in the investigations occurred. As indicated above, we have taken substantial remedial measures as a result of the issues identified during the investigations, which includes significantly increasing our focus on transparency and commitment to the EITI.

We are committed to using the lessons learned from our investigations, not only to drive our own focus on ethical business practices, but also to help address the challenge of corruption in the extractive industry. As disclosed in our Ethics and Compliance report, we actively engage and support local anti-corruption and bribery efforts.

We are exploring how we can further support strengthening of anti-corruption measures and promote responsible business practices in countries where we operate. We will provide further updates on the steps we take to address these topics.

Our participation in EITI working groups and engagement with participants have helped us strengthen our approach to transparency, which we consider an essential element of these efforts.

In 2021, our engagement with the EITI focused on the following areas:

Glencore Payments to Governments Report 2021

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Our approach |  Our contribution |  Our payments to governments	|  Additional information
Overview of payments to		Chief Financial Officer's		Our approach to			External engagement
governments made in 2021		introduction		tax and transparency

Chief Financial Officer's introduction

continued

• We are supportive of the EITI and the

objective of the EITI Association to

make the EITI Principles and the EITI

Standard the internationally accepted

standard for transparency in the oil,

gas, and mining sectors.

• We recognise the importance of

company ownership information being

publicly available. Disclosing this

information enables a cleaner, fairer

operating and investment environment

and supports tackling corruption and

financial crime. We provide beneficial

ownership information on our operating

joint ventures across our industrial

business.

• In September 2021, along with four other

mining companies, we became a

signatory to a statement by companies

on beneficial ownership transparency.

The commitments set out in this

statement go beyond those made as an

EITI supporting company.

• In addition, we are committed to not

partnering or contracting with

companies assessed as high corruption

risk that decline to identify their

beneficial owners, unless appropriate

mitigation measures are implemented

to reduce corruption risk. We have also

publicly disclosed on our website, for the

first time, details of our active marketing

encouraging the disclosure of mining and exploration contracts with host governments. We believe that this type of contract transparency can support building trust and ensuring accountability in the sector.

• We welcome the EITI Standard's approach for contract transparency for EITI-compliant countries. Similarly, as a member of the International Council of Mining and Metals (ICMM), we support its Transparency of Mineral Revenues Position Statement, which includes a commitment to contract transparency.
• We are aware of increasing stakeholder interest in material loans repayable with product (also referred to as 'resource- backed loans') and are supportive of the drive towards greater transparency in this area. We have disclosed relevant information on our resource backed loans, to the extent that the information is not commercially sensitive or confidential.

We have provided all the relevant disclosures on our contracts, beneficial owners, and resource backed loans.

2021 payments

During 2021, our total payments to governments, were around US$7.6 billion, while almost US$4 billion is reported

relating to our ownership interest in the Antamina, Cerrejón and Collahuasi joint ventures. This compares, respectively, to a 2020 total of US$5.8 billion and US$2.1 billion under the EU reporting requirements. The year-on-year increase reflects increased production and commodity prices as the global economy recovered from the slowdown caused by the global pandemic in 2020.

In 2021, our global effective tax rate, when adjusting for significant items (primarily impairments, foreign exchanges adjustments and tax losses not recognised), was 33.5% (29.7% in 2020).

Our contribution to national governments and host countries goes beyond the taxes and royalties that we pay. During the year, we spent US$6 billion on wages and benefits for the 135,000 people working for Glencore (including as contractors) and US$68 million on initiatives that benefit the communities living around our operations.

We welcome your feedback on this report and our approach to transparency.

Governments

US$7.6bn

in taxes, royalties and other payments+

Global adjusted effective tax rate

33.5%

Employees

US$6bn

in salaries, wages, social security and other benefits

Communities

US$68m

sales/purchase agents.

• Since 2019, we have publicly stated our

commitment towards supporting and

pursuant to the EU Accounting Directive extractive industries' reporting requirements, including payments

Steve Kalmin,

Chief Financial Officer 30 June 2022

on initiatives supporting local community development

+ This should be read alongside the Basis of

Reporting document, available on

• We continue to cooperate with a previously disclosed and ongoing investigation by the Office of the Attorney General of Switzerland and by the Dutch Public Prosecution Service. The timing and outcome of these investigations remain uncertain.

glencore.com.

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Our approach |  Our contribution |  Our payments to governments	|  Additional information
Overview of payments to		Chief Financial Officer's		Our approach to			External engagement
governments made in 2021		introduction		tax and transparency

Our approach to tax and transparency

We are committed to complying with all applicable tax laws, rules and regulations. We pay all relevant taxes, royalties and other levies in amounts determined by the legislation of relevant national, regional or local governments. We seek to maintain long-term, open, transparent and cooperative relationships with tax authorities in our host countries.

Tax transparency

We welcome fiscal transparency as it encourages the responsible management of revenues from our activities. We believe that countries that transparently and effectively allocate natural resource wealth for the benefit of their communities have the potential to attract greater, more responsible and longer-term business investment. It is imperative that businesses, governments and civil society work in partnership to support transparency.

Our global reach and presence in some higher-risk jurisdictions result in Glencore generally having to navigate enhanced complexity and uncertainty in accounting for income taxes, particularly the evaluation of tax exposures and recoverability of deferred tax assets.

Our Board Audit Committee regularly reviews with senior management our potential tax exposures globally and the key estimates taken in determining the positions recorded, including the status of material communications with local tax authorities and the carrying values of deferred tax assets.

Intra-group transactions

The Glencore group comprises separate legal entities established in many jurisdictions. Like many multinational enterprises, our business activities are co-ordinated (in terms of personnel, assets and capital) on a worldwide basis.

Our global nature necessitates us apportioning overall group profitability between our operating jurisdictions. International tax law and in particular the OECD Transfer Pricing Guidelines (Guidelines) and Article 9 of the OECD Model Tax Convention, governs this process. These require that individual entities within the Group transact with each other at the same price that they would if they were independent parties and in due recognition of the true value to be accorded to the transaction.

The purpose of this apportionment and of the Guidelines is twofold: for the fair division of Group profit to enable the levying of tax according to where it is earned; and to ensure that the same profit is taxed only once.

Our Group Tax Policy commits us to not engineer structures or transactions that exploit transfer-pricing rules by artificially 'transferring' profit into lower tax jurisdictions. We trace all intragroup transactions to value-adding commercial activities.

Reflecting the complexity of the Group's operations, and the legitimate concern of tax administrations to collect the full amount due to them, our transfer pricing should be subject to scrutiny and even occasional dispute.

We approach both scrutiny and dispute in a fair and transparent manner, but we resolutely defend the principle that profit must be taxed only once and that tax administrations are as bound in law by the Guidelines as we are.

'Tax havens'

Although there is no universally applied definition of the term 'tax haven', it is generally understood to refer to a jurisdiction that imposes little or no tax on income or profits. In recent years, governments, the media and the public at large have raised legitimate questions regarding the alleged diversion of business profits by multinational enterprises into tax havens mainly to avoid paying local taxes.

We do not undertake any such activity. Both our Group Tax Policy and our adherence to the Guidelines forbid the allocation of profit to jurisdictions that do not provide value-adding activities and do not have any real commercial substance.

Nevertheless, we continue to make use of companies incorporated in what would be termed tax neutral or tax haven jurisdictions. Where that occurs, it is always for a specific purpose and the companies used can be referred to as special purpose vehicles (SPVs). Glencore primarily uses SPVs for two broad purposes:

1. As intermediate holding companies (to hold single investments, groups of similar investments or joint venture investments for accounting, administrative, governance or legal convenience).

2. As parties to a legal contract with a non-Group member where it is necessary that the SPV has no other function.

Our continued use of SPVs is to serve a commercial or administrative purpose, has no tax motivation and is fiscally transparent, i.e., it generates neither a tax saving nor expense. For this reason, when we need to establish an SPV, it is often in a tax-neutral jurisdiction, as tax in these cases is an irrelevance.

We have undertaken a review of all entities established in 'tax haven' jurisdictions with the intention of consolidating or liquidating as many as possible. Where it is not possible to do this, these entities usually adopt tax residence in a non-tax haven jurisdiction where the Group can establish enhanced local substance.

As a result of this review, we have removed from our Group structure many tax haven- incorporated companies, or established their tax residence in Switzerland, the UK or another non-tax haven jurisdiction. This review continues to be a focus during 2022.

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