McDonald’s to pay $1.3B to settle French tax cases

McDonald’s Corp. agreed to pay 1.25 billion euros ($1.3 billion) to settle probes in France where the Big Mac maker was accused of dodging taxes by unirly shifting revenue tofa Luxembourg and Switzerland.

The twin settlements involve a 508 million-euro deal to end a French criminal probe into tax fraud allegations as well as the payment of an extra 737 million euros in back taxes and penalties.

Top financial prosecutor Jean-Francois Bohnert said the total amount to be paid by McDonald’s is two-and-a-half times larger than the taxes it skipped — nearly 470 million euros.

McDonalds restaurant in Montpellier, southern France

Pascal Guyot/AFP/Getty Images

“It’s therefore a genuine punishment,” Bohnert, who runs the Parquet National Financier or PNF, said at a Paris hearing during which Judge Stephane Noel detailed the amounts and approved the resolution of the criminal charges. Under the terms of the deal, the company didn’t plead guilty.

The combined amounts are a French record for tax-fraud settlements, surpassing the 965 million-euro twin deal reached by Google in 2019 to end civil and criminal probes. Overall, the largest amount France collected in a criminal case comes from the Airbus SE case where the planemaker paid 2.1 billion euros in 2020 as part of a coordinated bribery resolution with further payments in the US and the UK.

McDonald’s France said in a statement after the hearing that in the past few years, it had carried out “technical discussions” with tax and criminal authorities to reach an agreement on the fiscal framework for the use of the brand and know-how in the country for 2009 to 2020.

The fast-food chain has long faced scrutiny over its taxes, and its own unions complained to French authorities and European Union officials that it unfairly shifted profits. While Thursday’s cases ended in a penalty, McDonald’s won a rare reprieve at EU level in 2018 when competition regulators dropped a separate investigation into the legality of the double non-taxation of certain profits running through Luxembourg.

The French criminal case took several years to come to a conclusion. It was kickstarted by complaints from McDonald’s employees, including one lodged at the PNF in 2015. The following year, convicts swooped in on McDonald’s French headquarters west of Paris to gather evidence.

The investigations focused on so-called transfer-pricing arrangements on commercial transactions between company units, often denounced as unfair methods to shift profits to lower-taxation jurisdictions.

McDonald’s was suspected of having unfairly hiked, more than a decade ago, the level of royalties French entities paid from 5% to 10%, Prosecutor Sebastien de La Touanne said.

“This modification of the royalty seemed to have no justification,” he said on Thursday. De La Touanne added that it didn’t take into account the French entities’ financial efforts to develop their local activity and wasn’t in line with international standards.

During the hearing, Judge Noel also highlighted the country’s importance for McDonald’s. “France is the group’s second-largest market in terms of revenues,” he said.

.

Leave a Comment