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«AgroInvest» — News — McDonald's under tax scrutiny in France

McDonald's under tax scrutiny in France

2014-01-23 11:04:16

McDonald's Corp. is the latest U.S. company to come under fire in France for the way it pays its taxes.

The fast-food chain defended itself Wednesday against a media report alleging that McDonald's France has avoided paying taxes on around €2.2 billion ($2.98 billion) of revenue over the past five years.

"McDonald's pays all of its taxes in France on the totality of its revenue, in line with current legislation," said Alexis Bourdon, the McDonald's France vice president in charge of finance.

French magazine L'Express reported that the French Finance Ministry suspects McDonald's of diverting fees paid by franchisees to units in Luxembourg and Switzerland, avoiding some corporate taxes in France, where the rates are higher.

McDonald's acknowledges that its French restaurants pay royalties to the U.S.-based parent company, but it said in a statement that it "firmly refutes" allegations that it excluded revenue from French taxes. McDonald's France and its franchises have paid €1 billion in corporate tax in France since 2009, the company said.

French officials declined to comment on the specific allegations against the company. "You have asked me about a tax case about which I can't tell you anything, as it is protected by rules on tax secrecy," Finance Minister Pierre Moscovici told Parliament on Wednesday, in response to a lawmaker's question. "But rest assured that my ministry has a very close eye on everything companies do."

McDonald's France said tax inspectors visited its headquarters in Guyancourt, west of Paris, in October seeking information, but said that the visit was part of a regular tax inspection. The company said it "fully cooperated" with the French tax authorities.

McDonald's is quite popular in France, the second-largest contributor to the company's profits after the U.S., according to a spokeswoman in Paris.

The chain has 1,258 restaurants across the country, 80% of which are managed under franchises, according to the company's French website. The franchisees pay a licensing fee to McDonald's for use of the brand and for such things as information-technology systems, restaurant decoration and training for staff.

The license fees are accounted for as business expenses, which are deductible from corporate tax in France, Mr. Bourdon said.

McDonald's is only the latest multinational company to come under scrutiny for allegedly shifting profits and avoiding corporate income taxes through the use of royalty fees paid between business units. French officials in recent years have investigated Google Inc., Amazon.com Inc., Microsoft Corp. and other U.S. companies for shifting profits, though the companies and many tax experts say their arrangements are legal.

In Europe, McDonald's has set up a thicket of corporate entities to hold real estate and restaurants, as well as to collect royalties from franchise restaurants owned by outside companies. Many franchisees in Europe, for instance, pay a percentage of their annual revenue to a Luxembourg company called McD Europe Franchising S.à.r.l., according to a company filing. The Luxembourg company then pays an annual fee to the parent company.

This arrangement was highlighted in the L'Express article.

McDonald's does pay significant taxes in France, through the holding companies that own real estate and restaurants in the country. Holding company MCD France paid nearly €89 million in corporate income tax in 2012, at least in part for its subsidiary McDonald's France, which posted profit of €286 million, according to corporate filings. Overall, McDonald's France, which owns part or all of many restaurants in the country, brought in €850 million in revenue.

 

 

The Wall Street Journal