The US Internal Revenue Service, or IRS, has demanded that the American multi-national Coca-Cola Co. pay United States dollars 3.3 billion in unpaid taxes for the years between 2007-2009 together with the corresponding interest, the soft-drink maker announced.
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The disagreement centers around how much the company believes should be reported as taxable income in the US , in relation with licensing that allows its foreign affiliates to sell products like soft drink concentrates to bottlers overseas.
Typically, Willens said, the cases are settled for a fraction of the amount of the assessment.
In a submitting with the Securities and Change Fee, Coca-Cola stated it has been following the identical methodology for figuring out its taxable U.S. revenue for nearly 30 years. The company has been advised that “the matter has been brought to the IRS’s top lawyer with the recommendation that it be litigated”, according to Bloomberg’s report of Coca-Cola’s regulatory filing.
But Coca-Cola said it had followed the accounting principles for transfer pricing – how earnings are accrued between branches of a company – established in an agreement with the IRS in 1996.
“They hardly ever get to court, because neither party wants to experience the hazards of litigation”, Willens said.
Coca-Cola is just one of a number of large corporations in the U.S.to become embroiled with the IRS due to profits recorded in foreign countries, which some critics say can shield income unfairly from taxes in the U.S.
“The [Internal Revenue Service] now seeks to depart from this long-standing practise in order to increase substantially the amount of tax”.
The IRS, in a statement Friday, said it can not discuss specifics of a corporate audit, “based on federal disclosure regulations and federal law”.
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The IRS issued the notice following a five-year audit. “We are among hundreds of other companies now facing these types of adjustments involving payments”.
