The diverted profits tax – set at 25%, which is 6% higher than corporation tax – was brought in to prevent international firms from using transfer pricing, where they divert goods and services via a lower tax jurisdiction to avoid paying in the UK.

That’s not the definition of transfer pricing. And transfer pricing is a system of rules companies must follow, not one they mustn’t.


6 thoughts on “Jeebus”

  1. Typical of the ignorance of the media.

    The general concept of transfer pricing is simple.

    You sell or buy goods or services from a connected party in a foreign tax jurisdiction.

    Would that transaction take place at the same price if the parties were not connected?

    If not, you adjust the price to the ‘third-party’ price.

    The transfer pricing rules are there as a mechanism to prevent tax avoidance, not as a method of avoiding tax.

    And the Diverted Profits Tax was targeted at companies seeking to avoid a permanent establishment in the UK, not as a weapon against transfer pricing.

    My guess is the diverted profits tax will bring in £0.


  2. That’s quite shocking. I can understand mistaking m/b/trillion, but if a journalist doesn’t know what transfer pricing is, they certainly shouldn’t be writing authoritatively about it.

  3. D-t-P
    Yes – it looks like it. I was surprised that this wasn’t categorized as “Ragging on Ritchie”

  4. I think it’d more a question of a journalist struggling (a) to get their own head around and then (b) explain what is itself quite a nebulous idea: when do transfer pricing rules themselves not give the government what it thinks it’s due from the activity?

    There must be something in it – despite, I will happily admit, my own extreme scepticism – for the tax take from DPT appears to be rising.

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