Can a set of steak knives save Pepsi in its ATO tax battle?
The clash between PepsiCo and the tax office is being closely watched — particularly by US software companies.
For High Court judge Simon Steward, Pepsi’s battle with the tax office over concentrate syrup ultimately comes down to a set of steak knives.
When Kristen Deards SC, representing the Australian Taxation Office (ATO), opened her case on day one of the appeal in Canberra last week, Steward was lying in wait.
Deards argued that the licence fee paid by Schweppes to bottle Pepsi and Mountain Dew in Australia included royalties for the use of PepsiCo’s intellectual property (IP).
As PepsiCo is a non-resident, she said this made it liable for royalty withholding tax (RWT). While the standard rate is 30%, a "double tax" treaty with the United States reduces it to 5%.
