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1. Apportionment of Gross Profits of Local Branch to Real Centre of Management abroad

91. The mere fact that the management of a business is not established in N.E.I., whereas the business itself is carried on entirely in N.E.I., cannot be considered of sufficient importance to justify holding that part of the profits have been made in the country where the management is situated. This standpoint is due to the fact that the enterprises in N.E.I. are primarily agricultural and mining enterprises. The former might be called agricultural-industrial concerns, because they turn the raw material into the product fit for the international market in their own factories on their own estates. For staple produce (sugar, tea, coffee, pepper, copra, tin and rubber), world market prices exist, and many of these products are sold by tender or sealed bids.1 Consequently, the work of the directors with regard to the selling is of very little importance in the making of profits. Moreover, the fact that a corporation is established outside of the N.E.I. is often of a purely formal nature.

note

92. Sometimes the management abroad performs services to which part of the profits may be attributed; but, in principle, no special part of the profits is to be apportioned to the management as such. Practice will, no doubt, reveal that, in many concerns, it is impossible to keep strictly separate the management as such and its activities with regard to the making of profit.

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