The Coca-Cola Co. is set to appeal a US court decision that supported a government bid to claim circa $6bn in taxes.
The soft drinks giant revealed that the US Tax Court entered this decision today (2 August) in the ongoing case between Coca-Cola and the US Internal Revenue Service (IRS).
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The decision reflects a liability of approximately $2.7bn. This is expected to rise to around $6bn when accounting for interest, according to Coca-Cola.
Coca-Cola said it “strongly believes the IRS and the Tax Court misinterpreted and misapplied the applicable regulations involved in the case and will vigorously defend its position on appeal”.
In September 2015, the Sprite and Fanta brands owner first received a notice from the IRS seeking around $3.3bn of additional federal income tax for years 2007 through 2009.
According to the drinks company, “the IRS stated its intent to reallocate over $9bn of income to the US parent company from certain of its foreign affiliates retroactively, rejecting a previously agreed upon methodology without prior notice to the company”.
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By GlobalDataThe following month, the IRS pointed the dispute toward litigation and then in 2020, the Tax Court voiced its opinion in favour of the IRS.
Last November, the Tax Court issued a second related opinion also siding with the IRS on the remaining issue.
Today, Coca-Cola said: “The company believes it will prevail on appeal with respect to the issues raised in both the 2020 and 2023 Tax Court opinions.”
It added: “The company continues to believe it will prevail in the case and will continue to vigorously defend its position.”
In the company’s recently posted first-half results, it reported a 3% rise in net revenues and a 13% jump in organic revenues. Unit case volumes were up 2%.
While first-half reported operating profit and earnings per share were down year on year, once the impact of exchange rates and one-offs (which included a charge linked to its acquisition of Fairlife) were excluded from the numbers, both metrics grew year on year.
