MM MR MR M F IRDUGHM
FROM: K Etberington
DATR: 29 Hoy 1991
Rrr: Xs 168
R & D TMING
I tbought you should know the present position on this issue.
7he proposal that was originally med* by RLD was for a club
' warship fee of half the IM expenditure divided equally among the
ambers and the rest split on a turnover basis. This woo never
formally accepted by the ambers and, became of the membership fee,
mmld hove caused problems with rvvenue authorities as an
=acceptable basis for intercompany pricing.
lo consultation with Alma Newd I concluded that the only fair basis,
which would also be acceptable to tax authorities, mu an allocation
on the basis of external not turn&vw. SLW *grow to this but BLATCo
raised objections as to what should be included it turnover. (To the
extent those objections are valid they apply also to the original RLD
proposal.)
It low beam accepted that turnover relating to companies which
receive no benefit should be excluded is associated companies,
companies In the Indian sub-Continent and ant of Africa. and Suriami
mod Guyana. This Oman that BW will be asked to pay wore. Carl
ve my objections when I spoke to him in
-bacbler did not be
early May but Rev Pritchard would have to agree. As mom as I have
SATCo's agreement to the formula I propose to write to SW again.
SATCo are still arguing that inter-company not turnover value of
sales into China through gong long should be allocated to MM cm the
basis that the contribution cm this business is insufficient to
all maketing and selling costs Md FAD. I me resisting this. TbwY
bmve also base arguing that cigar and leaf turnover be excluded but
way be expected to drop this am that they how been made swam that
If the MM figures wame similarly adjusted It could skew the formula
against tbm.
We discussed whether, once the basic formula was agr*&d. we could ask
Comede for an additional profit nork up. You agreed to raise this
with then at an opportme immot.
1017
XR:ar:corrm/zfbrd
C'.
B.A.T INDusTRiEs P.L.C. - MMNESGTA DEPOWrORY COPY - PRODUCED PURSUANT To VILD. OF
CONSENT JUDGMENT DATED 5/8/96 IN SrATE (W A*AmWsoT;A, Er AL v. PmL#p Afmm& ET AL_ CASE M. C1.94.&M