Nah! They have already paid for the materials, in the countries they bought them from. That reduces their margin in the UK (because it is COGS being deducted) hence they pay tax on their local profit margin - their added value in other words. It would only get silly if Nissan said that their cars built in the UK made no profit in the country because the brand in Japan sent them a monster bill for the right to have the Nissan badge on the radiator grill. This is how Starbucks and Amazon are playing it. Don't understand how RR are trying to get off the hook. Maybe they're doing the same thing.
Is that really the case though? Perhaps the goods are being transferred to a sales division at cost and therefore doesn't technically make profit at the manufacturing base, but rather at the point of sale, wherever that may be.
Indeed. That is transfer pricing, which is behind the whole problem. It's legal, but it shouldn't be. Transfer pricing allows you to invent your COGS so that you also invent your profit. Of course, if you've ever studied the accounts of a multinational, you'll see that it is a lot more like a novel than a history. You just invent the stuff you want to. Management will tell the accountants the figure they want to find at the end, and the accountant provide a narrative to get there. Invent a few provisions, mark down or write off some assets, and you're there. Small anecdote: in my MBA we studied Nestlé (local firm). They'd invested millions in a new research centre not far away. Well, that investment centre was never put in the books. It was written off in one year - all charged as a cost instead of being depreciated over time (as you would expect). Cue big cost, lower profit (which must have suited them at the time) and a huge latent asset. In the same year it was brought into existence, it was magicked out of existence. You really can do pretty much what you want. As for all the inter-company selling and resellng and charging and recharging: you haven't got a hope of knowing what's going on. I can only imagine what must go on in the banks - it must be like Alice in Wonderland.
