It’s the Real Thing: Coca-Cola May Owe $3B in Tax
After numerous high profile transfer pricing court losses, the IRS is fighting hard to win $3.3 billion in back taxes from Coca-Cola. The IRS argues that Coca-Cola has shifted over $9.4 billion of income offshore over 2007 through 2009 by undercharging overseas business units for trademarks and formulas developed in the US. Coke maintains that its foreign marketing units drive demand for Coke products so transfer pricing is correct.
Clayton & McKervey’s transfer pricing team is keeping a close eye on the trial that could prove to be one of the biggest transfer pricing events in recent years. Alex Martin, principal at Clayton & McKervey, notes that the IRS has submitted a list of 121 witnesses from as far away as South Africa, India and Liberia – along with the CEO of Coke.
“The IRS wants to win this case badly, and the investment in deposing witnesses shows how important factual explanations can be when preparing a transfer pricing documentation. A transfer pricing case can be a big return on resources for tax authorities, even if this case dates from 2007.”