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CANADA: Coke faces $66m tax sting from Canadian investigation

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Coca-Cola Bottling Ltd is being investigated by Canadian tax collectors, which may result in the soft-drinks giant handing over more than C$100m (US$66m) worth of back taxes, the Toronto Globe and Mail has reported.

It has revealed that Canadian tax investigators are examining how Coca-Cola prices the concentrate it uses to produce its drinks and whether the company charged too much to its bottling operations to keep both its Canadian profits and therefore taxes low.

The concentrate is made in Puerto Rico where taxes are substantially lower.

Charging an inflated price to the Canadian operation would earn the concentrate subsidiary more money, thereby exposing more Coca-Cola profits to the easy-going Puerto Rican taxman, while starving the tax-hungry Canadian authorities of money.

The audit period being investigated is between 1990 to 1997, when the company was being traded as Coca-Cola Beverages in Canada. This is before it was incorporated in the multi-national's US operation, being bought by Atlanta-based bottler Coca-Cola Enterprises in 1997.

During the period being audited, Coca-Cola in Canada experienced losses or made small profits. For instance in 1995, it made C$4m on sales of C$930m worth of soft drinks.

That year, the company paid C$160m to its subsidiary for concentrates, marketing and other services.

The Globe and Mail said that representatives from Coke and federal officials from the Canadian government have been meeting for several months to discuss possible solutions to settle the issue.


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