EU probes Luxembourg on McDonald’s tax avoidance deal

Ronald McDonald, the American burger icon. [Westworld]

EU antitrust regulators have asked Luxembourg for information on its tax rulings for McDonald’s after labour unions accused the US fast food chain of avoiding taxes, a person involved in the issue said Tuesday (31 March).

The move, which neither the EU nor Luxembourg would immediately confirm, falls well short of the proceedings the EU has instigated against other American multinationals in Luxembourg, where Brussels believes unfairly low taxation may have distorted competition. It does, however, put the restaurant group’s financial arrangements in the spotlight.

Unions from the United States and Europe and British-based charity War on Want last month urged the European Commission to investigate what they said involved about €1 billion in tax between 2009 and 2013.

“The Commission has sent a letter to Luxembourg asking them to clarify the facts,” the source told Reuters.

McDonald’s did not immediately respond to a request for comment. A spokesman for the Luxembourg government said he was not aware of the letter. A Commission spokesman declined comment on whether a letter was sent to Luxembourg about McDonald’s.

The Commission’s competition authority last year launched four investigations into whether deals struck with three national taxation authorities in the EU — known as tax rulings — constituted illegal state aid for the firms concerned.

If proven, those could mean Amazon and FIAT paying back large sums in back-taxes to Luxembourg as well as Starbucks to the Netherlands and Apple to Ireland. Belgian tax rulings are also being probed.

Luxembourg focus

A spokesman for Competition Commissioner Margrethe Vestager said: “Combating tax evasion and avoidance is a top priority … The Commission is taking a structured approach when using its state aid enforcement powers to investigate where it believes that selective tax advantages distort fair competition.”

>> Read: Vestager says will use ‘Luxleaks’ documents in EU tax probe

The Juncker Commission has moved to insist on all 28 member states making tax arrangements with multinational firms more transparent. It says it plans further regulation this year to prevent what critics say have been schemes that benefit global firms and some small states at the expense of government revenues in other countries.

Juncker himself, who was Finance Minister and Prime Minister of Luxembourg for a quarter of a century, has deflected criticism of his country’s use of tax rulings to attract foreign businesses, and says his priority is a level playing field across Europe. 

>> Read: Juncker emerges stronger from Luxleaks censure motion

More than 300 companies, including PepsiCo Inc, AIG Inc and Deutsche Bank AG, secured secret deals from Luxembourg to slash their tax bills, the International Consortium of Investigative Journalists (ICIJ) reported on 5 November, quoting leaked documents.

The companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, the group of investigative journalists said, based on a review of nearly 28,000 pages of confidential documents.

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