Tax Havens

IRS Says Coca-Cola Owes $3.3 Billion in Taxes

Not so sweet.
Not so sweet. Photo: Justin Sullivan/Getty Images

Surprising probably no one, the largest beverage company in the world (Coca-Cola) has joined the largest coffee company (Starbucks) and largest burger chain (McDonald’s) on the list of corporations whose accountants seem well versed in the intricacies of tax havens. The IRS has told Coca-Cola it owes $3.3 billion in back taxes, plus interest, on profits earned overseas. According to a regulatory filing the company made on Friday, the agency found the deficit after auditing the 2007-through-2009 tax years, and has turned the matter over to its top lawyer with the recommendation “that it be litigated.”

The IRS requires corporations to pay 35 percent tax on foreign profits, but there are of course many, many loopholes and tax credits. Coca-Cola’s particular problem involves the taxable income it reported on licensing to foreign affiliates — the IRS says it wasn’t enough. Coca-Cola actually managed to lower its effective tax rate by another 11.5 percent last year, and it gets tax incentives from Brazil, Costa Rica, Singapore, and Swaziland, but says it’s sure the IRS’s math is “without merit” — either the agency carried nine zeroes wrong, doesn’t understand U.S. tax law, or something. In a statement, the company said it “has followed the same methodology for determining our U.S. taxable income from certain foreign company operations for nearly 30 years.”


IRS Says Coca-Cola Owes $3.3 Billion in Taxes