Thursday

15th Nov 2018

Commission opens McDonald's tax probe

  • The fast-food giant dodged taxes in the EU and the US after a deal with Luxembourg. (Photo: Steve Baker)

The European Commission opened a formal probe against McDonalds Thursday (3 December) over tax deals with Luxembourg that resulted in the US fast-food giant not paying taxes in Europe or in the US.

Under two tax-rulings issued by Luxembourg authorities in March and September 2009, McDonald's Europe Franchising was exempted from paying taxes in the Grand Duchy, where the McDonalds subsidiary was registered.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

In addition to its Luxembourg main office, McDonald's Europe Franchising has a Swiss branch, which the commission says "has a limited activity related to the franchising rights" and a US branch, "which does not have any real activities".

The tax deal was about profits made from "royalties paid by franchisees operating restaurants in Europe and Russia for the right to use the McDonald's brand," the commission explains in a statement.

In 2013, for example, these profits reached €250 million.

A first tax ruling was granted on the ground that profits would be subject to taxation in the US, in conformity to the Luxembourg-US double taxation Treaty.

"Under the ruling, McDonald's was required to submit proof every year that the royalties transferred to the US via Switzerland were declared and subject to taxation in the US and Switzerland," the Commission says.

However McDonalds told Luxembourg tax authorities that it did not pay taxes in the US because McDonald's Europe Franchising did not have any taxable presence in the US under US law.

Despite this admission, McDonald's Europe Franchising was granted a second tax ruling.

"With the second ruling, Luxembourg authorities accepted to exempt almost all of McDonald's Europe Franchising's income from taxation in Luxembourg," the Commission says.

Double non-taxation

The commission thinks that the deal, which was done when Jean-Claude Juncker, the current commission president, was Luxembourg's prime minister, could constitute a breach of EU state aid rules.

"The purpose of double taxation treaties between countries is to avoid double taxation – not to justify double non-taxation," competition commissioner Margrethe Vestager said in the commission statement.

The commission will now "assess whether Luxembourg authorities selectively derogated from the provisions of their national tax law and the Luxembourg-US double treaty and whether thereby the Luxembourg authorities gave McDonalds an advantage not available to other companies in a comparable factual and legal situation."

The McDonalds sweetheart deal with Luxembourg was among the cases revealed in the so-called LuxLeaks file published by media outlets in 2014, along with other multinational companies such as Ikea, FedEx, Disney and Microsoft.

The commission has already launched investigations into tax deals between online retailer Amazon and Luxembourg and between IT firm Apple and Ireland, as well as on the Belgium system of "excess profit"'.

In October, coffee company Starbucks and automaker Fiat were sentenced to pay back between 20 and 30 million euros in taxes to Luxembourg and the Netherlands after the Commission ruled that their tax deals amounted to unfair state aid.

The McDonalds probe comes a day after a European Parliament special committee on tax rulings was extended for six months Wednesday.

The committee, which was created after the LuxLeaks revelations and is chaired by French centre-right MEP Alain Lamassoure, is looking at how companies and EU states comply with tax legislation.

It has so far investigated tax rulings in Luxembourg and the role of former PM Jean-Claude Juncker. It also grilled multinational executives about their tax avoidance strategies.

The committee's mandate will now end in June 2016.

Juncker denies role in tax scams

EU Commission chief Juncker says he had nothing to do with Luxembourg's sweetheart tax deals in his time as PM of the microstate.

News in Brief

  1. Tusk: Brexit summit on Sunday 25 November
  2. Full text of Brexit withdrawal agreement published
  3. Greece to investigate former PM's bank accounts
  4. EU threatens to retaliate if US introduces auto tariffs
  5. Frontex: Spain now main destination for migrants
  6. German AfD funding scandal widens
  7. UK cabinet agrees Brexit deal after marathon session
  8. Czechs join other EU states in rejecting UN migration pact

Stakeholder

An open China brings opportunities to Europe

Some 60 years ago, the first major World Fair after World War II was held in Brussels. Sixty years on, China International Import Expo (CIIE), the first world expo dedicated to expanding imports, will open in Shanghai, China.

Stakeholders' Highlights

  1. NORDIC COUNCIL OF MINISTERSTheresa May: “We will not be turning our backs on the Nordic region”
  2. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  3. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  4. NORDIC COUNCIL OF MINISTERSState of the Nordic Region presented in Brussels
  5. NORDIC COUNCIL OF MINISTERSThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  6. NORDIC COUNCIL OF MINISTERSThe Nordic gender effect goes international
  7. NORDIC COUNCIL OF MINISTERSPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  8. NORDIC COUNCIL OF MINISTERSNordic design sets the stage at COP24, running a competition for sustainable chairs.
  9. Counter BalanceIn Kenya, a motorway funded by the European Investment Bank runs over roadside dwellers
  10. ACCACompany Law Package: Making the Best of Digital and Cross Border Mobility,
  11. International Partnership for Human RightsCivil Society Worried About Shortcomings in EU-Kyrgyzstan Human Rights Dialogue
  12. UNESDAThe European Soft Drinks Industry Supports over 1.7 Million Jobs

Latest News

  1. US steps in to clean up Cyprus
  2. 'Decisive progress' on Brexit as British cabinet backs deal
  3. Asylum for Macedonia's ex-PM put Orban on spot
  4. How the 'EU's Bank' fails to raise the bar on accountability
  5. Knives out on all sides for draft Brexit deal
  6. Romania data chief defends forcing press to reveal sources
  7. EU to review animal welfare strategy
  8. Macron's 'European army': why is everyone talking about it?

Stakeholders' Highlights

  1. Mission of China to the EUJointly Building Belt and Road Initiative Leads to a Better Future for All
  2. International Partnership for Human RightsCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  3. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  4. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  5. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  6. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  7. Mission of China to the EUChina: Work Together for a Better Globalisation
  8. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  9. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  10. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  11. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  12. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future

Join EUobserver

Support quality EU news

Join us