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Tax strategy

Working late in the office

We are a global investor and Canada's largest single-profession pension plan. We strive to take a comprehensive approach to manage and assess risk across all levels and time horizons. Our investment decisions are based on our obligation to pay members' pensions today and to meet pension obligations in the future. In making those decisions, we are diligent in our investing process and consistent with our fiduciary duty to our members. Before we describe our tax approach, it is vital to first understand how the taxation of Ontario Teachers' fits within the larger Canadian framework.

Pension taxation in Canada

Promoting the retirement income security of Canadians is an important goal of the Government of Canada. Private employment-related registered pension plans like Ontario Teachers' are essential to meet that goal.

Canada's retirement income system has four main programs: Universal government benefits (such as the Universal Old Age Security); the Canada Pension Plan/Quebec Pension Plan (i.e. social security); employment pension plans (such as registered pension plans); and individual retirement savings (such as registered retirement savings plans, i.e. RRSPs). Ontario Teachers' is an employment pension plan and, as such, is integral to supporting and fostering retirement savings.

Similar to an RRSP, pensioners pay taxes when they receive their pension payments and, therefore, Canadian pension funds, including Ontario Teachers', are exempt from tax on investment income in Canada regardless of where it is earned. This mechanism was intentionally designed so that retirement income is only taxed once.

Our investment decisions are made to fulfill our obligation to pay members' pensions.

Our pensioners pay taxes when they receive their pension payments.

Tax approach

Pension plans in Canada have diversified globally to earn the best possible returns, at an appropriate level of risk, in order to ensure adequate funding of pension obligations. Ontario Teachers' currently invests in more than 50 countries around the world. As an international investor, Ontario Teachers' is subject to the laws of Canada, as well as the laws and regulations of every jurisdiction where we invest or have an office. We comply with all applicable tax laws and regulations.

When we engage with tax authorities worldwide, we are transparent and disclose all relevant facts regarding our investments to the tax authorities. Tax laws are often subject to a broad range of interpretations. We apply a prudent approach to our interpretation with a view to ensure that our investing position is reasonable. Given the complex nature of tax legislation around the world, there are often areas lacking clarity of application. In the event of a difference of opinion, we endeavour to positively engage with the tax authorities and will be persistent in our defense where we believe we are applying the legislation appropriately.

As a global investor, we support and contribute to the OECD's Base Erosion and Profit Shifting project and other global initiatives working to create a single set of consensus-based international tax rules to protect tax bases while offering increased certainty and predictability to taxpayers. In particular, we welcome the multi-jurisdictional adoption of the OECD's Common Reporting Standard and Country-by-Country Reporting initiatives to facilitate the timely sharing of information with relevant tax authorities. As is the case with all Canadian-based enterprises with yearly revenues in excess of €750 million, Ontario Teachers' reports a Country-by-Country breakdown of our worldwide income to the Canada Revenue Agency, who will share this document with the tax authorities in jurisdictions in which we operate.

We have adopted a conservative approach to tax risk and tax planning.

We recognize that the global tax landscape is constantly evolving. We monitor changes to remain in compliance.

We support and contribute to the OECD's Base Erosion and Profit Shifting project – and in particular, the transparency initiatives of country-by-country reporting to the tax authorities.

Tax framework

Ontario Teachers' has adopted a conservative approach to tax risk and tax planning, which is reflected in our tax governance framework.

Ontario Teachers' appetite for tax risk is aligned with and integrated into our overall approach to Investment Risk Management. Day-to-day management of the tax risk is delegated to the Chief Financial Officer (CFO). Ontario Teachers' aim is not to avoid or eliminate tax risk entirely, but to mitigate the risk to an acceptably low level through adherence to the controls and procedures embedded in our tax governance framework.

We have an in-house team of tax professionals that support the CFO and use their experience and judgement in assessing tax implications of proposed investment transactions. Where the tax treatment of transactions may be uncertain, we engage external advisors in order to understand the potential options and the associated non-tax implications.

We recognize that the global tax landscape is constantly evolving. Emerging tax trends and changes in tax laws are monitored in order to understand any potential impacts and to confirm that our investments remain in compliance.

We believe it is important for governments to pursue clarity and predictability in tax laws as it encourages investment. We engage and constructively contribute to public consultation by tax authorities and policy makers in order to ensure that the pension fund perspective is well understood and our ability to meet our pension obligations is not compromised.

This document is regarded as complying with the duty under Schedule 19 of the UK Finance Act 2016 for 2023 on behalf of all relevant entities within the Ontario Teachers' group.