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EU set to investigate McDonald's tax deal with Luxembourg: sources
December 2, 2015 / 2:27 PM / in 2 years

EU set to investigate McDonald's tax deal with Luxembourg: sources

BRUSSELS (Reuters) - EU antitrust regulators are likely to launch a formal investigation into McDonald’s tax deal with Luxembourg, two people with knowledge of the matter said on Wednesday, widening the bloc’s crackdown on corporate tax avoidance.

A man sleeps at a 24-hour McDonald's restaurant in Hong Kong, China November 10, 2015. REUTERS/Tyrone Siu

European Competition Commissioner Margrethe Vestager could announce the investigation as early as Thursday, the sources said, following on the heels of other recent cases, including deals between Luxembourg and carmaker Fiat and online retailer Amazon.com.

Labor unions and the charity War on Want, have accused McDonald’s of avoiding around 1 billion euros ($1 billion) in tax between 2009 and 2013 by routing revenue through a Luxembourg unit and have called for EU regulators to take action against the U.S. fast-food chain.

McDonald‘s, in a statement, said it had not been told of any EU investigation and that it complies with all tax laws and rules in Europe.

“From 2010-2014, the McDonald’s companies paid more than $2.1 billion just in corporate taxes in the European Union, with an average tax rate of almost 27 percent,” the company said.

“Additionally, we pay social, real estate and other taxes. Our independent franchisees, who own and operate approximately 75 percent of our restaurants in Europe, also pay corporate tax and many other taxes.”

The EU competition enforcer has been considering evidence regarding McDonald’s for some time, said a third source familiar with the issue.

Corporate tax avoidance has become a hot political issue in Europe as deals that helped some multinationals slash their tax bills to as little as 1 percent or below have stirred public anger.

In October, Vestager ordered the Dutch government to claw back up to 30 million euros in back taxes from U.S. coffee chain Starbucks and told Luxembourg to do the same for Fiat Chrysler Automobiles.

Cases against Apple’s Irish tax deal and Amazon’s arrangement in Luxembourg are also pending.

European Commission spokesman Ricardo Cardoso and Luxembourg’s finance ministry both declined to comment on the McDonald’s case.

The case will put the spotlight back on European Commission President Jean-Claude Juncker as Luxembourg developed its favorable tax system during the near quarter-century that he served as finance minister or prime minister or held both jobs.

Luxembourg’s economy has been built on attracting multinational firms. The government has in recent months sought to provide greater transparency over its tax regime.

Additional reporting by Phil Blenkinsop and Lisa Baertlein in Los Angeles; Editing by Gabriela Baczynska and Susan Fenton

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