Fast Food Major McDonald’s Accused of Evading 1 billion Euro Tax in Europe; Labor Union and Charity Urge EU to Investigate
Fast food behemoth McDonald’s is being accused of evading about 1 billion euros in tax. The accusations, made by a charity and labor unions, stated that between 2009 and 2013, the company routed revenues through one of its business units in Luxembourg. The two entities have urged the European Commission to launch an investigation into the matter. In Europe, especially, corporate tax evasion has become rampant and much political debate on the topic has ensued. The European Union executive has recently initiated the scrutiny of tax deals that certain European nations have cut with leading MNCs. This also includes deals signed by Luxembourg with ecommerce giant Amazon and carmaker Fiat. The charity dubbed War on Want and an umbrella labor organization in the US has asked the European Commission to add McDonald’s to that list of investigations.
According to the Service Employees International Union and the European Federation of Public Service Unions, the tactic employed by McDonald’s to save tax was this: It got its restaurants to pay tax-deductible royalties amounting to about 5% of its turnover to one of its subsidiaries in Luxembourg, which enjoyed minimal tax liability.
News agency Reuters reported that when it contacted McDonald’s European office for a comment on the matter, there was no immediate response. In previous instances, the company has maintained that it always followed tax rules across each jurisdiction where it runs restaurants or operates offices.
The company’s tax filings in Luxembourg in 2012 indicate that the company McD Europe Franchising Sarl earned about US$1 billion by way of franchisee fees as well as McDonald’s subsidiaries located across Europe. On profits of over US$288 million in the same year, the company paid a measly 1.4% tax. This is way lower than Luxembourg’s corporate tax rates of 29%.