PROF DR. EBERHARD SCHEFFLER
MITGUED DES vORS DES
BATIG
GESELLSCHAFT FUR BETEILIGUNGEN ~BH
B-A-T Industries p.l.c.
Martin F. Broughton
Windsor House
50 Victoria Street
London SWIH ONL / England
Hamburg, 29th Auc
gust 1991
VSc/as
Dear Martin,
Tax audit; concealed profit distribution
As I have already told you briefly, the tax audit
has looked
closely into RATCols fee charges for research and
advisory
work. The tax auditors were not willing to
acknowledge these
charges fiscally because evidence of the costs was
inadequate.
In negotiations we were then able to achieve at
least a partial
acknowledgement.
In the case of research costs only the
apportionment formulae
for the years 1981 to 1985 have been corrected by
eliminating
intercompany sales. This means that for the years
1981 to 1985
there were concealed profit distributions
totalling DM 221,000.
;Ls BATCo has failed to provide adequate evidence
of the cost
of aavisory work, the value of man-days has bee-o
estimated at
DM 1,ouo per working day. This means concealed
profit distrib-
utions totalling DM 1,625,000 for the years 1981
to 1985.
BATIG's taxable income was increased by the
figures quoted.
We have been trying for quite some time to
persuade BATCo to
amend the agreements accordingly. It is my
impression that they
do not really appreciate the Germans' requests for
amendments,
which they undoubtedly feel to be petty-minded. In
the past
I have repeatedly drawn attention to the danger of
concealed
profit distributions and wish to stress this
because it was
the most unpleasant point in the otherwise very
objective
discussions with the tax auditors.
With kind regards,
rQ
C:)
___4
C-)
N)
Co
\0
BAT Industries document for Province of British
Columbia 12 November 1999