§ Mr. Gerald BowdenTo ask the Chancellor of the Exchequer what action he proposes to take in the light of the recent study of thin capitalisation by the Organisation for Economic Co-operation and Development.
§ Mr. Norman LamontWe welcome this study by the OECD of the international tax consequences which can arise from "thin capitalisation" — that is, the use of loans as a substitute for equity capital in the financing of companies for the purpose of obtaining a tax advantage. The problem for the United Kingdom manifests itself primarily in relation to subsidiaries of foreign companies, and it gives rise to growing concern.
In considering the case for any possible counteraction the wider economic and commercial implications must, however, be assessed and we are therefore inviting comments on the OECD report from interested parties. Any comments should be sent by 31 March 1988. An Inland Revenue press release issued today gives further details.