American soda giant Coca-Cola has been ordered to pay some $2.7 billion in U.S. tax adjustments, or about $6 billion including interest, for incorrectly reporting its foreign sales between 2007 and 2009, it announced Friday.
2 min
” Coca-Cola strongly believes that the IRS and the Federal Internal Revenue Service misinterpreted and misapplied the regulations in force (…) and we will defend our position vigorously on appeal. ” said the Atlanta, Georgia-based group in a statement.
The penalty covers the years 2007, 2008 and 2009. It represents a cumulative total over these three years of $2.72 billion, according to the decision rendered Wednesday by Judge Albert G. Lauder, consulted by AFP. But, including interest, the bill for this tax adjustment climbs to approximately $6 billion by June 28, 2024, according to the Coca-Cola press release and a stock market document filed on July 29.
In the document, the group specified that it would still be necessary to add the interest accrued between June 28 and the actual payment – at an undetermined date at this stage -, but the company also indicated that it would be reimbursed if it obtained satisfaction on appeal. The group also warned that if the American tax authorities decided to apply the same calculation methodology to financial years after 2009, it could suffer an additional adjustment of approximately $16 billion (including interest) as of December 31, 2023.
“ We are optimistic that, between our ability to generate cash from our operating activities and our ability to borrow funds at reasonable interest rates, we will be able to manage the range of potential outcomes of this matter. ” assured the group.
The case was launched in 2015 after an investigation by the US Internal Revenue Service found that the giant had understated its taxable income in the US – by $9 billion over the three years under review – because of the way it calculated the amount paid by affiliates in Brazil, Chile, Costa Rica, Egypt, Ireland, Mexico and Swaziland.
These companies manufactured concentrated products (syrups, powder) in their factories, which were then used by hundreds of bottlers in Europe, Africa, Asia, Latin America and Australia to concoct the drinks. According to the tax authorities, they should have theoretically paid Coca-Cola much more for the right to use its secret formulas, its name and other intellectual property.
Read alsoCoca-Cola, world’s biggest plastic polluter, according to survey