ATO trumpets court order for Pepsi to pay tax

The news: The Australian Taxation Office (ATO) has lauded a Federal Court decision that drinks manufacturer PepsiCo is liable to pay royalty withholding tax for trademarks and possibly diverted profits tax. PepsiCo could still appeal.

The context: This was the first time a court has considered the diverted profits tax. The ATO has been using the diverted profits tax, which came into effect in 2017, to pursue multinationals that make money in Australia but pay little or no tax.

Diverted profits tax and royalty withholding tax are separate to income tax.

What they said: "The Pepsi matter is a lead case for our strategy to target arrangements where royalty withholding tax should have been paid. Whilst there may still be more to play out in this matter, it sends strong signals to other businesses that have similar arrangements to review and consider their tax outcomes," ATO deputy commissioner Rebecca Saint said.