Coca-Cola faces $20 billion tax bill with US government dispute

Coca-Cola to Face Off Against IRS in Florida Court Over Tax Liability

A US federal court case is set to begin on Thursday in Florida, pitting beverage giant Coca-Cola against the Internal Revenue Service (IRS) over the company’s tax liability on overseas profits. The dispute centers on transfer pricing, a practice used by companies to determine prices for transactions between their own affiliates.

Coca-Cola is appealing a 2020 US Tax Court ruling that upheld the IRS’s finding that the company underreported profits from transactions between its foreign subsidiaries. In 2015, the IRS notified Coca-Cola of billions in back taxes owed after concluding it had undercharged units in several countries, including Ireland and Brazil.

The case has significant implications for multinational corporations, as the outcome will determine how much tax US-based companies must pay on income generated through their foreign subsidiaries. The dispute dates back to 1996, when Coca-Cola and the IRS settled a tax audit for liabilities from 1987 to 1995.

Coca-Cola argues that it should be able to continue using a pricing formula agreed upon in the 1996 settlement, while the IRS contends that the terms of this settlement should not apply to audits conducted in 2007, 2008, and 2009. The company has expressed confidence in its appeal and could face a tax bill of up to $20 billion if the US Court of Appeals for the Eleventh Circuit sides with the government.

The case is being closely watched by corporate circles, as it may serve as a template for future audits of large multinational companies generating significant profits overseas. The IRS has been ramping up its tax collection efforts under the administration of former US President Joe Biden, including high-profile cases against Microsoft and Airbnb.

Source: Al Jazeera