Transfer Pricing: In effect hits Coca Cola

ATL-Editor 20 September 2015

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NEW YORK — Coca-Cola was notified by the IRS that it owes $3.3 billion more in federal taxes, as well as interest, for 2007 to 2009, the company said Friday.

The Atlanta-based company said in a regulatory filing that it believes the assessments from the Internal Revenue ServiceTax authorities are fundamental institutions within government frameworks, overseeing tax assessment, collection, and administration. Their operations ensure that tax laws are enforced and public funds are collected efficiently. This article delves into tax authorities' purpose, responsibilities, and structure, offering insights into their essential role in supporting government functions and economic stability. What is a Tax Authority? A tax authority is... More are without merit and plans to pursue “all administrative and judicial remedies necessary to resolve the matter.”

The maker of Sprite, Dasani, Powerade and other drinks says the disagreement is over how much it should report as taxable incomeThe tax base is a fundamental concept in taxation, representing the total amount of economic activity or assets upon which a tax is levied. It is the foundation upon which governments calculate the amount of tax owed, based on factors like income, property value, sales, or corporate profits. Understanding the tax base is essential for tax professionals, businesses, and policymakers,... More in the U.S., in relation with licensing that allows its foreign affiliates to sell products like soft drink concentrates to bottlers overseas.

It’s a tax issue that comes up frequently for multinational companies, said Robert Willens, president of a tax accounting consultancy in New York. He said companies tend to charge their foreign subsidiaries low licensing fees as a way to shift reportable income away from the U.S., where corporate taxCorporate Tax refers to the tax imposed by governments on the income or capital of corporations. Corporations, considered separate legal entities, are taxed on their profits, meaning the income generated from their operational activities, investments, and other financial undertakings. This tax is generally a key revenue source for governments, helping to fund public services, infrastructure, and other essential functions. The... More rates are higher.

Typically, Willens said, the cases are settled for a fraction of the amount of the assessment.

“They hardly ever get to court, because neither party wants to experience the hazards of litigation,” Willens said.

In a filing with the Securities and Exchange Commission, Coca-Cola said it has been following the same methodology for determining its taxable U.S. income for nearly 30 years.

“The IRS now seeks to depart from this long-standing practice in order to increase substantially the amount of tax,” the company said in a statement. “We are among hundreds of other companies currently facing these types of adjustments involving payments.”

Coca-Cola Co. said it was notified that a recommendation was made to the IRS’s chief counsel that the matter be designated for litigation. The company said it plans to start disputing the matter by filing a petition in U.S. Tax Court.

It said the IRS made the determination on owed taxes after a five-year audit.

Categories: FP News

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