McDonald’s hit by French tax bill

Adam Thomson
McDonald's France gets handed a tax bill
McDonald's France gets handed a tax bill

McDonald's France has been sent a bill for alleged unpaid taxes, as part of a crackdown by French authorities on multinational companies that shift their profits abroad.

According to people familiar with the case, the French finance ministry has taken issue with the amount of money McDonald's France paid to a Luxembourg-based affiliate for services — including its use of the fast-food restaurant brand name — which helped to reduce McDonald's taxable profits in the country.

McDonald's France declined to comment on reports of the bill, which some media reports have suggested could be as high as €300 million — including €100 million in fines.

Instead, the company said in statement: "McDonald's is one of the biggest taxpayers in France and we are proud of it." It added that McDonald's and its franchises had paid €1.2 billion in taxes since 2009, invested €1 billion and created more than 15,000 jobs in France.

France's finance ministry declined to comment on the matter, pointing out that it was governed by tax secrecy rules.

News of the tax bill, first reported by French business magazine L'Expansion, follows a European Commission investigation into a deal that McDonald's struck with tax authorities in Luxembourg.

In December, the commission accused Luxembourg of establishing a tax scheme for McDonald's that allows the US fast-food group to pay no tax on its European royalties, either in the US or in the Grand Duchy.

Margrethe Vestager, competition commissioner, said at the time that Luxembourg had acted against the spirit of a US-Luxembourg double taxation treaty.

"A tax ruling that agrees to McDonald's paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules," she said. "The purpose of double taxation treaties between countries is to avoid double taxation — not to justify double non-taxation."

McDonald’s eyes greater restaurant expansion in Asia

France's move against McDonald's comes as the EU continues a broader crackdown against aggressive corporate tax planning. Brussels issued its first verdicts in tax cases in October, ordering Luxembourg and the Netherlands to claw back tens of millions of euros of underpaid tax from Italian carmaker Fiat and US coffee shop chain Starbucks.

A report published last year entitled "Unhappy Meal" also claimed that McDonald's and its subsidiaries had undertaken an aggressive European restructuring in 2009 that "led to the avoidance of significant amounts of tax across the continent".

This report, written by several trade unions and the charity War on Want, claimed that the restructuring could have meant the French government missed out on up to €713 million in taxes between 2009 and 2013.\

More from the Financial Times :

China stock market: the 29 minutes that shook the world
Google and McKinsey to mine Kazakh data
It is time for China to tackle its bad debts

France now represents a big market for McDonald's — thanks to the rise in popularity of fast food in the country over the past few decades. According to its website, the French business had outlets at more than 1,000 locations in the country in 2014, more than in the UK.

Sending it a tax bill appears to be part of a bigger push by the national government to scrutinize the tax practices of multinationals. In February, the country's Socialist government ruled out the possibility of a tax deal with Google — only days after the US search engine struck a £130 million settlement with the UK government over back taxes.

McDonald's is bringing back this menu item

Michel Sapin, finance minister, said at the time that the bill Google would eventually have to pay in France would be "way bigger" than the amount it had settled with UK authorities.

At a European level, multinational companies have also been facing more scrutiny on tax — especially since the leak of the so-called Panama Papers, which reveal how a Panamanian law firm has set up offshore funds to help companies and individuals hide their wealth.

This month, Lord Hill, EU commissioner for financial services, unveiled a set of draft rules that would compel companies with global revenues of more than €750 million per year to provide a public country-by-country breakdown of key financial information — claiming the move would expose complex corporate arrangements intended to avoid tax.

However, these measures need approval from the European parliament and national governments to become law, a requirement that will almost certainly mean months of debate on amendments.