Why Coca-Cola and the US taxman are at war over a $20bn tax bill
Summary
Coca-Cola and the US Internal Revenue Service (IRS) will argue in a Florida court over a $20 billion tax bill related to profits made by Coca-Cola’s foreign subsidiaries. The dispute focuses on how the company sets prices for transactions between its own foreign units and whether the IRS’s tax claims are correct.Key Facts
- Coca-Cola is challenging a 2020 US Tax Court decision that supports the IRS’s claim of underreported profits.
- The IRS says Coca-Cola undercharged its foreign subsidiaries in countries like Ireland, Brazil, and Mexico to reduce US tax payments.
- The legal fight involves a transfer pricing method agreed on in 1996, which Coca-Cola wants to keep using.
- Coca-Cola has agreed to pay $6 billion to the IRS while appealing but may owe up to $14 billion more.
- The case could influence how much tax US multinational companies will pay on overseas earnings in the future.
- The IRS has been increasing efforts to tax companies that use transfer pricing to lower US taxes.
- Another major case involved Microsoft, which the IRS claims owes nearly $29 billion in back taxes.
- The outcome could become a guide for future IRS audits of other large companies with profitable foreign subsidiaries.
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