HC Deb 25 November 1974 vol 882 cc62-3W
Mr. Sedgemore

asked the Chancellor of the Exchequer whether, in considering tax proposals for his recent Budget, he took into account profits earned but not declared in this country due to the operation of transfer pricing by multi-national companies.

Dr. Gilbert

The need to establish proper transfer prices for transactions between member companies of multinational groups has been kept in mind in preparing the tax legislation currently proposed. The Oil Taxation Bill contains provisions strengthening the relevant provisions of the law—Section 485 of the Taxes Act 1970—to enable this to be done more effectively for oil companies, and the Finance Bill will include provisions to strengthen these powers generally.

Mr. Sedgemore

asked the Chancellor of the Exchequer what estimates he has made of the profits earned but not declared in the United Kingdom due to the operation of transfer pricing by multinational companies.

Dr. Gilbert

Establishing proper transfer prices for transactions between member companies of multi-national groups is both important and difficult. Provisions bearing on the question in relation to oil companies are included in the Oil Taxation Bill and the Finance Bill will also contain certain general provisions. However, it is not practicable to produce any estimate of the profits of multi-national companies which may be escaping United Kingdom tax as a result of their transfer pricing policies.

Mr. Sedgemore

asked the Chancellor of the Exchequer if he will move to set up a Select Committee to examine the scale of the operation of transfer pricing by multi-national companies in the United Kingdom and make recommendations.

Dr. Gilbert

Under Section 485 of the Taxes Act the transfer prices paid in transactions between associated companies can over a wide field be adjusted by the Inland Revenue to the prices which would have been paid if the parties to the transactions had been independent enterprises acting at arm's length. The main difficulty is in obtaining adequate evidence for the purpose of fixing arm's length prices in particular cases. I do not think that appointment of a Select Committee would contribute to overcoming the difficulties in applying the legal provisions, which are currently being strengthened.