Coca-Cola faces $16B tax dispute with IRS

Coca-Cola is embroiled in a $16 billion tax dispute with the Internal Revenue Service (IRS), which alleges that the company hid profits in low-tax countries like Ireland and Brazil to avoid US taxes.

A recent court decision ruled that Coca-Cola owes $6 billion in unpaid taxes and interest from approximately 15 years ago, a figure that could rise due to the company’s alleged practice.

Coca-Cola plans to issue 1 billion euros in new debt through two 500 million euro bonds in the Euro market to cover payments related to this dispute.

The strategy known as “reverse Yankee” bond issuance, allows US-based companies to raise money in Euro or Sterling bond markets, benefiting from lower borrowing costs and diverse monetary policies.

This form of bond issuance has gained popularity among companies with European operations, including Harley-Davidson, Colgate-Palmolive and Johnson & Johnson.

Coca-Cola had raised $7 billion this year, including $3 billion in dollar bonds, to address potential tax-related costs. It plans to appeal the court’s decision, seeking to reduce or overturn the substantial tax bill.

The outcome of the case is critical not only for Coca-Cola but also for the IRS, as the $16 billion could fund the agency’s entire annual budget and test its ability to tackle complex corporate tax avoidance cases.

Barclays, BNP Paribas and JPMorgan Chase are leading the debt deal, set to settle on August 15.