Coca-Cola’s $6 Billion Tax Fight: How Transfer Pricing Works

In 2020, a US Tax Court largely upheld the IRS’s transfer pricing adjustments against Coca-Cola. That left the company facing about $2.7 billion in additional taxes after the court found the company had under-reported income from transactions between its overseas affiliates. With interest, the total swelled to roughly $6 billion. Coke is appealing the decision.

Cross-border transfer pricing refers to how multinational companies set prices for transactions between related entities in different countries. Governments use transfer pricing rules to prevent improper profit shifting from high-tax to low-tax jurisdictions. As governments seek more tax revenue to fund public priorities, tax authorities are increasingly scrutinizing this complex and potentially lucrative area of tax enforcement. In this video, we explore how transfer pricing works and how it can lead to billion dollar tax adjustments.

Video features:
Caleb Harshberger, tax reporter

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