Australia, PepsiCo Head for Appeals Clash Over Tough Penalty Tax

PepsiCo Inc. will head back to court in Australia next week to appeal a case that may validate the government’s use of a weapon it can use to crack down on multinationals over potential tax dodging.

The company is appealing an unfavorable court ruling on taxes on royalties for the use of Pepsi trademarks in Australia. But much of the appeal’s focus and importance concerns the use of Australia’s “diverted profits tax,” or DPT, which the previous ruling upheld.

The DPT gives the government a powerful deterrent, slamming companies with a 40% tax rate upfront if they’re found to ...