PepsiCo Should Pay Royalty Tax, Australia Tells High Court

PepsiCo did effectively incur taxable royalties under contracts to make and sell its beverages in Australia, even though the company and the contracts themselves say otherwise, an attorney for Australian tax authorities told the country’s top court Wednesday.

The High Court should consider the economic and commercial substance of the contracts, not just their legal form, when deciding whether they include royalties for the use of PepsiCo Inc. trademarks and other intellectual property, Kristen Deards, counsel for the Australian Taxation Office, said in the first day of oral arguments in the tax dispute.

The ATO contends that PepsiCo’s ...