The Coca-Cola Group plans to sell new debts worth 1 billion euros (1.09 billion dollars) and use part of the proceeds for possible payments in the context of its ongoing tax proceedings with the US tax authority IRS.
The owner of the Sprite and Fanta brands announced in an SEC filing yesterday (August 8) that it plans to issue two €500 million bonds that would increase the company’s new borrowings by $7 billion this year.
It further stated that part of the sum would be used for “possible payments in connection with our ongoing tax dispute with the US tax authority IRS”.
Last week, the soft drink giant announced it would appeal a U.S. court ruling that placed liability at around $2.7 billion. Coca-Cola says that figure could rise to around $6 billion when interest is taken into account.
Accordingly The Financial TimesCoca-Cola could actually have to pay up to $16 billion in back taxes because some of its production processes are located in countries like Ireland and Brazil.
As the publication reported, a US tax court ruled that Coca-Cola had concealed “astronomical amounts” of profits in low-tax countries in order to protect them from US authorities.
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By GlobalData
The €1 billion issue is known as a “reverse Yankee,” where US companies raise money on the euro or pound bond markets. The move allows American companies to benefit from the monetary policies of central banks in different regions.
In a conference call last month, Chief Financial Officer John Murphy said Coca-Cola raised about $4 billion in cash to finance the Fairlife acquisition, which was first announced in 2020. Murphy also said the amount “may also include pre-funding of upcoming payments related to the IRS tax proceeding.”
Coca-Cola is preparing to initially pay $6 billion to cover outstanding taxes and interest for the years 2007 to 2009 by issuing bonds, following a decision by the U.S. Tax Court last week.
In September 2015, the owner of the Sprite and Fanta brands received a notice from the IRS for the first time demanding that he pay approximately $3.3 billion in additional federal income taxes for the years 2007 to 2009.
According to the beverage maker, “the IRS has announced its intention to retroactively reallocate over $9 billion in income from some of its foreign subsidiaries to the U.S. parent company, rejecting a previously agreed-upon method without prior notice to the company.”
The following month, the IRS took the dispute to court, and in 2020, the tax court issued its decision in favor of the IRS.
Last November, the tax court issued a second opinion in which it also sided with the IRS on the remaining issue.
Coca-Cola said last week: “The company expects to prevail on appeal with respect to the issues raised in the 2020 and 2023 Tax Court rulings.”
