Pepsico reduces tax rate through Cork concern

Pepsico Inc, one of the largest food and drink company's in the world, has reduced its global tax rate though the organisation of its Cork-headquartered global concentrates operation, according to recent accounts filed in the US.

The headquarters of the global Pepsico concentrate operation moved to Cork last year.

The US multinational has a significant concentrates production operation in Little Island, Cork, which exports products around the world. It will not say what percentage of its worldwide concentrates production occurs in Cork.

A so-called "whistleblower" lawsuit opened in New York earlier this week alleged that Pepsico evaded $100 million in US tariff duties owed on concentrates imported from its Cork plant.

The company has strongly rejected the accusation. "This is a totally frivolous lawsuit from a former employee," a spokeswoman said.

"US customs has reviewed our concentrate shipment classifications from Ireland on multiple occasions and has raised no objections."

The Cork plant plays an important role in Pepsico's financial affairs.

In its filing to the Securities and Exchange Commission for the quarter to end September 2006, Pepsico Inc said: "The tax rate decreased 26.8 percentage points compared to prior year, primarily reflecting the absence of the $468 million tax charge recorded in the third quarter of 2005 related to our repatriation of undistributed international earnings in connection with the American Jobs Creation Act."

The accounts show pre-tax income of $2 billion for the quarter and provision for taxes of $548 million.

The producer of Pepsi Cola has had a production plant in Cork since 1974. It established a second concentrates plant in 2002 and since that year has invested more than $100 million in its Cork operations. Last year the multinational announced its plan to build a €10 million research and development facility in Cork and to move its worldwide concentrates division headquarters there.

As well as its manufacturing and other operations, Pepsico has had very significant treasury operations in Ireland for many years, based in the offices of Matheson Ormsby Prentice solicitors, in Dublin.

Most of the Irish Pepsico subsidiaries, both manufacturing and treasury, are unlimited and so do not produce publicly available annual accounts.

For one limited company, Pepsico Global Investment Holdings Ltd, the accounts for the year to end December 2005 show it made a profit of $49 million in the year, bringing accumulated profits to $209 million. Expenses were $32,559. The company provides finance to other group companies and had financial fixed assets of $732 million at the end of 2005. It is a subsidiary of Pepsico Antilles Holdings NV, which in turn is owned by the US parent.

The company accounts say it is subject to tax in the Netherlands Antilles under provisions of that location and "specific rulings received from the inspector of taxes".

Another unlimited company based in Dublin, Bramshaw, was a limited company in 2001 when its balance sheet showed it had financial fixed assets of $2 billion. It was involved in investing in other group companies including Dublin-based subsidiaries which received hundreds of millions in investments. Bramshaw was also subject to taxation in the Antilles and paid no tax in Ireland, the accounts state.