PepsiCo Australia Tax Spat Sparks Global Concern for Companies

PepsiCo Inc.'s legal battle with Australia over cross-border transactions will soon result in a final high court ruling that threatens to hike taxes for multinational companies.

The Australian Tax Office is arguing that PepsiCo owed taxes on royalties that were “embedded” in a sale of beverage concentrate from a Singapore Pepsi affiliate to an Australian bottler. The company won an earlier round in a lower court.

A loss for PepsiCo in the case could particularly expose industries such as pharmaceuticals and technology to higher royalty taxes, and may determine the extent to which Australia can use its diverted profits tax. ...