Weeks after European Union (EU) regulators ordered Fiat Chrysler and Starbucks Corp. to repay millions of dollars of “unfair” tax subsidies, McDonald’s Corp. now faces an EU investigation into its financial arrangements with the tiny country of Luxembourg.
As reported in the Wall Street Journal and Bloomberg, according to anonymous sources, the European Commission plans to open a formal investigation into whether Luxembourg violated state-aid rules. The McDonald’s investigation expanded the Commission’s probe into sweetheart tax agreements for companies across the EU. The investigation is already digging into certain deals reached with Amazon.com Inc. and Apple Inc.
Becca Hary, a McDonald’s spokesperson, stated that, “McDonald’s complies with all tax laws and rules in Europe and pays a significant amount of corporate income tax. While we have not been notified by the European Commission, we are confident that should an inquiry occur, it would be resolved favorably.”
McDonald’s tax affairs are currently under scrutiny in the midst of a worldwide crackdown on corporate tax-avoidance. The probes and investigations come as governments struggle to reduce major budget deficits and increase revenue. In fact, France’s fiscal authorities inspected the burger company’s French offices in 2013 while last year, the EU looked into McDonald’s tax dealings in Luxembourg.
The small country may have approved tax deals for many international corporations - numbering in the hundreds.
Documents leaked to the press last year revealed that more than 340 big companies such as FedEx Corp, Ikea Group and PepsiCo Inc. transferred profits to Luxembourg through favorable tax arrangements.
The McDonald’s investigation is the third case to focus on Luxembourg, adding it to the list including Amazon and Chrysler. The EU is also examining Apple’s tax arrangements with Ireland and the Commission ordered Starbucks to pay back taxes to the Netherlands.
From 2010 to 2014, McDonald’s paid corporate tax of more than $2.1 billion in the EU at an average tax rate of just about 27%. These taxes were in addition to real estate, social and other taxes. Moreover, independent franchisees “also pay corporate tax and many other taxes.”