Civil society groups in Europe have accused fast-food giant McDonald's Corp. (MCD) of evading more than 1 billion euros or $1.1 billion in tax over five years between 2009 and 2013. The company is said to have managed low taxes by routing its royalty payments from Europe through its subsidiary based in tax havens such as Luxembourg.
The one billion euro tax evasion figure has been derived by calculating the actual tax on the royalties McDonald's received from European countries and major markets like France, the U.K., Italy, and Spain.
The group, consisting of labor unions and a charity group, are calling for the European Commission and respective national tax authorities to launch an investigation on the world's largest restaurant chain's tax practices and take appropriate measures.
The coalition of European and American trade unions, along with U.K-based anti-poverty campaign group War on Want, unveiled a report today related to McDonald's deliberate avoidance of corporate taxes in Europe. The report is the first to shed light on the company's tax record.
The trade unions include, European Federation of Public Service Unions (EPSU), U.S.-based Service Employees International Union (SEIU), and European Federation of Trade Unions in the Food, Agriculture and Tourism sectors (EFFAT). The unions represent more than 15 million workers in different sectors of the economy in 40 countries.
"It is shameful to see that a multibillion euro company, that pays low wages to its workforce, still seeks to avoid its responsibility to pay its fair share of much needed taxes to finance public services we all rely on. Rather than supersizing profits and minimising taxes, McDonald's should change its recipes to ensure that Corporate Citizenship is at the core of its menu," said EPSU General Secretary Jan Willem Goudriaan.
McDonald's opened its first store in Europe in the Netherlands in 1971. Since then, McDonald's has grown to become the largest fast food company in Europe, with 7,850 stores and 20.3 billion euros in systemwide sales in 2013.
In Europe, over 73 percent of McDonald's stores are operated by franchisees that pay it a royalty. McDonald's European division accounts for nearly 40 percent of the company's operating income.
The report states that transnational corporations like McDonald's are avoiding taxes in Europe by routing royalty revenues through subsidiaries located in tax havens.
Oak Brook, Illinois-based McDonald's restructured its business in 2009 with the effect of extracting billions in royalties from its Europe operations and established McD Europe Franchising Sàrl, a Luxembourg-resident intellectual property holding company with a Swiss branch. This allowed the company to benefit from significant reductions of their tax rate on income earned from intellectual property.
The company also shifted McDonald's European headquarters from London to Geneva, which was reported as being for tax purposes. It then routed billions in royalties from its European operations to McD Europe Franchising Sàrl, which has paid a meager 16 million as tax between 2009 and 2013 on cumulative revenues of 3.7 billion euros.
Leaked documents, published by the International Consortium of Investigative Journalists (ICIJ),
revealed recently the complex corporate structures and secret tax deals that more than 300 companies like Pepsi, IKEA, and FedEx secured from Luxembourg in order to slash their tax bills and save billions of euros.
The European Commission has already opened formal investigations into tax deals signed between Italian automotive company Fiat and Luxembourg as well as released preliminary findings of its investigation into the global online retailer Amazon earlier this year.
In Wednesday's regular trading session, MCD is currently trading at $95.40, up $0.42 or 0.43% on a volume of 1.37 million shares. In the past 52-week period, the stock has been trading in a range of $87.62 to $103.78.
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