EU competition watchdog eyes McDonald's over taxes

The European Union's competition watchdog has U.S. fast-food giant McDonald's in its sights.

EU Competition Commissioner Margrethe Vestager told legislators Tuesday she is examining trade union allegations that McDonald's avoided paying more than one billion euros ($1.1 billion) in corporate taxes in Europe between 2009 and 2013.

Vestager said Tuesday that her office is "looking into the information gained by trade unions when it comes to McDonald's in order to assess if there is a case."

A sign for a McDonald's restaurant is seen in Times Square, New York.
Getty Images
A sign for a McDonald's restaurant is seen in Times Square, New York.

A coalition of European and U.S. unions claims that the company reduced its tax burden by moving its British headquarters to Switzerland and channeling money into a Luxembourg-based subsidiary with a Swiss branch.

The unions said the Luxembourg subsidiary, where 13 people work, had revenues over the five-year period of 3.7 billion euros and reported paying just 16 million euros in taxes.

The Commission's move is one of a series in the wake of the so-called LuxLeaks allegations about sweet deals for multinationals with offices in Luxembourg.

The Commission opened tax probes last year into Apple in Ireland, Starbucks in the Netherlands and Amazon in Luxemburg.

Read MoreEU tax probes for Apple, Amazon delayed

It believes that some multinationals are shifting profits between countries and depriving EU governments of tax revenues.

To tackle the problem, the EU has been working on new legislation that would require countries to automatically exchange information on their "tax rulings" every three months.

Tax rulings are the confirmation or assurance that authorities give to tax-paying companies on how their taxes will be calculated.

EU countries rarely share information about their tax decisions and are often unaware of rulings made by their partners, which creates a gap that some multinationals have exploited.