Tax Governance

■ Tax Governance and Risk Control Mechanism

The dedicated unit reports to the Board of Directors on tax compliance and news on domestic and international tax laws every half year. This enables the Board to not only effectively supervise the implementation status but also understand internal risks and tax trends. Under the effective functioning of the risk management mechanisms, E.SUN controls the frequency and amount of tax disputes to a low risk level.

  Item Description
Tax strategies Compliance and planning In 2020, E.SUN declares value-added tax via the internet for the first time. Technology is used to improve the operational efficiency of tax compliance. This year, various countries launched tax-related measures to relieve the impact of COVID-19. The domestic and overseas subsidiaries and branches decided to claim tax relief after conducting general evaluation.
Succession planning Professional knowledge on taxes is passed down through the establishment of operation manuals, work drafts, experience sharing and the establishment of the agent system.
Performance appraisal Tax personnel's performance is highly related to the annual tax work plan. Performance is evaluated via the achievement of goals. It is prohibited to adopt radical tax avoidance measures to obtain performance.
Tax risk management mechanism Three lines of defense With the checking of the three lines of defense and the monitoring of the key risk indicators, in 2020, three low-risk anomalies were discovered. E.SUN immediately evaluated the amount affected and formulated action plan for improvement as well as fortified the control points to reduce the likelihood of the occurrence of risk incidents to ensure that tax operations complied with relevant laws and internal regulations.
Board of Directors Using the identification of risks and the three lines of defense mechanism, high-risk tax incidents will be reported to the highest governance unit, the Board of Directors.
Whistleblowing mechanism on tax incidents Internal and external whistleblowing hotlines and mail boxes are established for reporting illegal or unethical tax-related matters.
Tax disclosure reliability Tax information disclosed in public channels such as the official website and annual reports is audited by a certified public accountant.

■ 2020 country-by-country reporting

■ E.SUN FHC income tax information for the past two years

Global average effective tax rate for the banking industry is 25.82% according to CSA Companion 2021 published by S&P Global. Since the statutory tax rates in Hong Kong (16.5%) and Taiwan (20%) where 90.41% of the revenue was generated are lower than other tax jurisdictions, and that OBU and securities income are exempt from taxes according to the tax laws of Taiwan, the effective tax rate is lower than the global average.
    2019 2020 Average of the two periods
Profit before tax (A) 23,070 20,529 21,800
Reported taxes (B) 2,950 2,481 2,716
Reported tax rate (B)/(A) 12.79% 12.09% 12.46%
Adjustments (D) Temporary difference 233 212 223
One-time difference 506 157 331
Tax-exempt income 1,426 1,786 1,606
Adjusted reported taxes (E)=(B)+(D) 5,115 4,636 4,876
Effective tax rate (E)/(A) 22.17% 22.58% 22.37%
Income tax paid (F) 2,754 3,841 3,298
Cash tax rate (F)/(A) 11.94% 18.71% 15.13%

Unit: million NTD, %