case study benchmark analysis

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• v.21(Suppl 3); 2023 Nov
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Community organizing for Black health equity in Canada: a multiple-case study analysis

Community organizing often plays a key aspect in voicing health inequities, improving health care access, implementing health promotion campaigns, or responding to public health crises. There is a paucity of research on community organizing for Black health in Canada.

To examine how Black communities in Canada have historically organized to address systemic racism, advance health equity and/or respond to a public health crisis. To use multiple case study design to identify factors that contributed to success and long-term sustainability of community organizing for Black health.

Study Design and Analysis:

We searched the academic and grey literature from 1900 to present and included cases of community organizing and partnerships that were based in Canada, led by the Black community, and were an organized effort to improve health. From our pool of cases, we used purposive sampling and engaged community members to analyze three successful Black community organizing efforts for health: Women’s Health in Women’s Hands (local), the Health Association of African Canadians (provincial), and the Black Health Alliance (national).

Setting and Population:

Black communities in Canada.

Conceptual Model:

This study draws heavily from conceptual frameworks of Afrocentricity, Communitybased Participatory Research and Community Coalition Action Theory.

Our literature search identified eight cases of Black community organizing. Cases varied in terms of chronology, contextual and process factors, experience delivering primary care and sustainability. The multiple case study analysis shed light on several key similarities in how Black community organizing operationalised and used the frameworks to advance Black health equity.

Conclusions:

Community-oriented primary care can promote Black health equity by engaging Black community organizers and health care providers, advancing academic-community partnerships, and advocating for policy changes to address structural racism. Black community members draw on Afrocentric values of collective input, resistance, and strength to combat injustice and address health disparities. Using partnership principles and practices, these initiatives honor Black community knowledge and leadership, intersectionality, capacity-building, health literacy, and community transformation while seeking shared power to advance health equity.

An analysis of Pepsi’s tax case in Australia: A look at ‘embedded royalties’ and diverted profits tax

In this article, we explore the landmark decision in Pepsi Inc v Commissioner of Taxation [2023] FCA 1490 and its implications for the characterisation of royalties for multinational  enterprises.

The Federal Court in Pepsi Inc v Commissioner of Taxation [2023] FCA 1490 found in favour of the Commissioner, holding that ‘embedded royalties’ arose under exclusive bottling agreements, notwithstanding that they did not expressly provide for payments in respect of the right to use PepsiCo group’s intangible assets. Multinational enterprises should therefore re-examine any ‘royalty-free’ related party arrangements to determine if these reflect the substance of the arrangement.

The case demonstrates the ability for Australia’s diverted profits tax ( DPT ) anti-avoidance measure to apply as a backstop measure, which if applied would be levied at a rate of 40 percent of the ‘tax benefit’ i.e., the entire royalty amount (versus the five percent treaty royalty withholding tax ( RWT ) rate that ultimately applied).

The Commissioner’s victory in the case bolsters the Australian Taxation Office’s ( ATO ) continued activity on intangibles. The recent release of Practical Compliance Guideline PCG 2024/1 relating to the migration of intangibles and the updated draft Taxation Ruling TR 2024/D1 relating to royalties in respect of software and intellectual property rights indicates that the ATO’s focus on intangibles is wide-ranging and is not limited to distributors.

Introduction

In a recent landmark decision [1] , Mochinsky J of the Federal Court of Australia ruled that a portion of payments made under exclusive bottling agreements made by Schweppes Australia Pty Ltd ( SAPL ), an Australian company owned by Asahi Breweries, was subject to royalty withholding tax ( RWT ) to the extent that they related to use of PepsiCo group’s intangible assets held by its US-based companies. These assets included trademarks, formulas, recipes and know-how essential for producing and marketing Pepsi, Mountain Dew and Gatorade products. 

In the alternative, if RWT did not apply, then the diverted profits tax ( DPT ) could have applied. The DPT is an anti-avoidance measure that applies to significant global entities, designed to prevent the diversion of profits offshore through arrangements involving related parties. 

The case has important implications for the characterisation of royalties for multinational enterprises, and is the first time a court has applied the DPT since it first came into effect on 1 July 2017.

The case revolves around Exclusive Bottling Agreements ( EBAs ) entered into by PepsiCo, Inc ( PepsiCo ) as owner of the Pepsi and Mountain Dew brands and Stokely-Van Camp, Inc ( SVC ) as owner of the Gatorade brand with Schweppes Australia Pty Ltd ( SAPL ), an Australian company owned by Asahi Breweries, as “Bottler”. There was also a separate Concentrate Distribution Agreement ( CDA ) between an Australian PepsiCo group entity and a Singaporean PepsiCo group entity:

Under the EBAs, PepsiCo and SVC sold, or procured a related entity to sell, concentrate to SAPL to produce beverages for Australian retail sale. Included in this arrangement were the rights for SAPL to use the trademarks and intellectual property ( IP ) in Australia. There was no express payment for the IP rights included in the payment for the concentrate and therefore no payments in respect of royalties. Under the EBAs, PepsiCo Beverage Singapore Pty Ltd ( PBS ), an Australian PepsiCo group entity, was designated as the seller of the concentrate.

Under the CDA, Concentrate Manufacturing (Singapore) Pte Ltd ( CMSPL ) a Singaporean member of the PepsiCo group produced concentrate according to a formula provided by PepsiCo and SVC. CMSPL supplied the concentrate to PBS. PBS then supplied concentrate to SAPL. The money received by PBS from SAPL was then passed across to CMSPL less a small margin.

Royalty withholding tax 

The Federal Court held that a portion of the payments made by SAPL to PBS under the EBAs constituted “royalties” for RWT purposes as they represented consideration for the use of or right to use the items set out in the definition of “royalty” in Article 12(4) of the US-Australia double tax agreement ( DTA ) and subsection 6(1) of the Income Tax Assessment Act 1936 (Cth) ( ITAA 1936 ). 

Whilst PBS was not a party to the EBAs, Mochinsky J found that payments made by SAPL to PBS were intrinsically tied to the license of PepsiCo and SVC’s trademarks and IP. Hence, without PepsiCo’s and SVC’s trademarks and IP, SAPL would not have been able to produce and sell the beverages under relevant brands. 

Secondly, Mochinsky J found that those royalties were in fact income derived by, and paid to, PepsiCo and SVC for the purposes of paragraphs 128B(2B)(a) and 128B(2B)(b)(i) of the ITAA 1936 and amounts to which they were beneficially entitled for the purposes of Article 12 of the US-Australia DTA. As PBS was nominated as the seller of the concentrate under the EBAs, this was in effect a ‘direction to pay’ PBS rather than PepsiCo and SVC. As such, the payments made by SAPL were income derived by and paid to PepsiCo and SVC as they were applied as they directed.

Accordingly, PepsiCo and SVC were liable to pay RWT at the rate of five percent on those royalties.

In determining the apportionment of the payments made by SAPL which related to royalties, the judge accepted the Commissioner’s expert evidence, adopting a royalty rate of 5.88 percent of SAPL’s net revenue from sales of the relevant products (subject to an adjustment) based on the expert’s review of comparable agreements. 

Diverted Profits Tax 

Mochinsky J held that if the RWT provisions did not apply, the DPT provisions would apply.

The relevant ‘tax benefit’ was found on the first of the Commissioner’s two alternative counterfactuals, that is, in the absence of the relevant scheme, the agreements might reasonably have been expected to encompass all of the property and rights provided by the PepsiCo or SVS and not for concentrate only, with the effect that RWT would have been payable on some portion of the payments.

Moshinsky J concluded that one of the principal purposes of each of PepsiCo or SVC in entering into or carrying out the scheme was to obtain a tax benefit by avoiding Australian RWT and to reduce US tax on income. Particularly relevant to this finding was the disconnect between the form and substance of the EBAs, the form of which provided that the payments made by SAPL were for the concentrate alone, whilst their substance indicated that the payments were in fact made for both the concentrate and the licence of the trademarks and IP.

A&M’s key takeaways

Although the decision is still being appealed, the case bolsters the ATO’s continued focus on intangibles. The ATO’s Practical Compliance Guideline PCG 2024/1 in relation to the migration of intangibles follows hot on the heels of this case and, similarly, the updated draft Taxation Ruling TR 2024/D1 on software and intellectual property rights shows just how broad the focus of the ATO is on royalties beyond just distribution agreements.

The finding that a royalty was paid to PepsiCo and SVS under the EBAs is significant as, prima facie, the payments made by SAPL were to an Australian entity (PBS). The case serves as a reminder that the substance of the arrangement will be scrutinised by courts and that careful legal drafting can only go so far. 

Disappointingly, there is still limited guidance on how taxpayers should apportion royalties, especially in light of where there are multiple products or services bundled in the relevant payments. This has been a challenge for taxpayers since the Commissioner expressed its concerns on ‘embedded royalties’ in Taxpayer Alert TA 2018/2. In this case, an expert witness was used to quantify the royalty based on comparable agreements in a benchmarking exercise. This analysis was not particularly helpful as a broad methodology to be applied and is fraught with challenge to implement when dealing with hard-to-value intangibles, such as was the case here.

Whilst the PepsiCo case is seen as the first DPT case in Australia, there was not much that was addressed or analysed specifically in relation to the ‘principal purpose test’ in the DPT versus the ‘dominant purpose test’ in the general anti-avoidance provision in Part IVA to give meaningful guidance to taxpayers. However, the case serves as a warning that courts are not unwilling to apply the DPT, which would have in effect resulted in a 40 percent tax rate (versus the five percent RWT rate that was ultimately applied).

The key takeaways are that multinational enterprises operating in Australia should review their arrangements in both form and substance and will need to have regard to the DPT. Transfer pricing is also an important consideration and should be appropriately documented. 

The A&M tax team is well-equipped to help navigate these issues. Contact us to discuss your particular circumstances further.

[1] Pepsi Inc v Commissioner of Taxation [2023] FCA 1490

Neil Pereira

Sean Keegan

Andrew Moore

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Sonepar plugs into a new era of freight matching with Transporeon Freight Procurement

About sonepar.

Sonepar France was founded in 1969 by Henri Coisne. It remains a family-owned business, but is now the world’s number one distributor of electrical equipment, generating record sales of €32.4 billion in 2022. 

However, Sonepar is not all about big bucks. In that same year,  the company launched its Green Offer to allow customers to purchase products based on a sustainability rating. They also had their greenhouse gas emission reduction targets validated by the Science Based Targets initiative (SBTi).

Sonepar in numbers:

• €60 million spent on transportation per year 
• €32.4 billion sales
• 15,000 tonnes shipped annually in France
• 40 countries
• 2,400 branches
• 170 distribution centres
• 44,000 employees

Kévin Arduino,

Transport Project Manager, Sonepar France

The challenge

Sonepar’s diverse product mix generates significant volume per delivery point, which led to logistical bottlenecks..

With their own transportation at saturation point, Sonepar turned to solutions such as chartering, which disrupted their ability to ensure Day +1 deliveries.

In addition, Sonepar grappled with office inefficiencies. Without a dedicated, automated platform they were unable to assess carrier responses collectively and maintain control over prices. This lack of homogeneity also made it hard to find new carriers and grow their supplier network.

The solution

Sonepar needed a digital freight match-making solution that would help them better manage their calls for tenders and expand their carrier network..

The answer was Transporeon Freight Procurement and in 2019 they implemented the platform into their daily operations, giving them a better overview of the responses and prices coming in from carriers. In addition, Freight Procurement’s ability to analyse huge amounts of data means they can eliminate tedious manual work.

The results

Sonepar has experienced tangible benefits through its collaboration with transporeon..

The distribution company has managed to integrate new carriers into their network, and streamline the evaluation process.

This optimisation has resulted in a 40% reduction in response tracking time and a 50% decrease in compilation and analysis time.

Explore more of our digital freight solutions

Together our products work in harmony to increase transport efficiency along the full lifecycle of freight activities.

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• Access the spot market more easily.
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• Cloud-based system provides real-time transparency.

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• In one single, easy to use interface, logistics teams can manage FTL, LTL, groupage, and ocean flows like never before.
• You no longer need to worry about manually finding and assigning the right shipment to the right carrier.
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• Transport Operations uses smart, data-driven workflows to automate the whole transport execution and monitoring process.

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• Paperless management of the consignment note through all involved parties
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Carrier Interfaces

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ACTIVATE EXCEEDS BENCHMARKS IN LUXURY RETAILER'S CTV SEQUENTIAL MESSAGING CAMPAIGN

Success by the numbers, achieved ctv cpc benchmark, above online video vcr benchmark, above display landing page visit rate benchmark.

A prominent luxury brand in the U.S., partnering with its advertising agency, aimed to heighten brand awareness in preparation for the holiday season, focusing primarily on CTV.

Their objective was to leverage sequential messaging (CTV to online video and display) to establish an omnichannel impact, engaging affluent audiences and aligning with premium publisher inventory that would resonate with the brand’s ethos.

THE CHALLENGE

During the implementation of this strategy via their main media-buying platform, the luxury brand faced hurdles in reaching their target audience at scale, causing significant under-pacing.

Faced with a tight campaign schedule and internal resource constraints, the brand sought to secure a new managed service offering with a tech partner capable of overseeing, executing, and optimizing campaigns.

The advertiser sought an alternative solution to their usual activation platform to address these challenges effectively.

THE SOLUTION: ACTIVATE

The luxury brand selected Activate, which reduces hops between buyers and premium publishers and increases media activation efficiency across cost, operations, and scale.

Via Activate, the brand was able to target the campaign’s niche, affluent audience across PubMatic’s entire premium inventory pool. PubMatic’s client services teams ensured swift and agile campaign setup, activation, and optimization, which was invaluable given the advertiser’s resource constraints.

In concert with PubMatic’s premium inventory, Activate’s robust support for sequential messaging and comprehensive audience targeting resulted in the customer meeting and/or exceeding campaign benchmarks.