The European Union on Wednesday ended a long-running investigation into the tax arrangements between US fast food giant McDonald’s and Luxembourg, finding the setup did not amount to illegal state aid.
With the decision, the maker of Big Mac and McNuggets escapes the fate of US giants Apple, Starbucks and Amazon, which were ordered by the EU to repay big amounts in back taxes, angering Washington.
“Luxembourg did not break EU state aid rules,” EU Competition Commissioner Margrethe Vestager told a news briefing in Brussels, though she carefully added that the company had managed to escape tax, albeit legally.
The case stemmed from a complaint by trade unions and the charity War on Want accusing McDonald’s of avoiding around one billion euros ($1.2 billion) in taxes between 2009 and 2013 by shifting profits from one corporate division to another.
“Of course, the fact remains that McDonald’s did not pay any taxes in Luxembourg on these profits — and this is not how it should be from a tax fairness point of view,” Vestager said.
But the commissioner said she welcomed that Luxembourg was in the process of closing tax loopholes related to the EU’s investigations.
These would “avoid such situations in the future,” she said.
Specifically, the Commission investigated whether the arrangements meant McDonald’s paid no tax in Luxembourg nor any dues to US authorities, under special treaties between Washington and the duchy.
The EU found that the deals complied with national law and could not be seen as an unfair advantage handed the fast food conglomerate by Luxembourg at the expense of others.
McDonald’s said it welcomed the decision and insisted it paid fair taxes in Europe.
“We pay the taxes that are owed and, from 2013-2017, McDonald’s companies paid more than $3 billion just in corporate income taxes in the European Union with an average tax rate approaching 29 percent,” a McDonald’s spokesperson said.
‘Missed opportunity’
Launched in 2015, the case against one of the world’s most iconic companies followed the LuxLeaks affair, which revealed that top global companies had negotiated lower tax rates, in some cases as low as one percent, in secret pacts with Luxembourg.
Luxembourg itself has been hit by negative decisions from Brussels — including a payback demand against Amazon for 250 million euros.
McDonald’s fate is in stark contrast to the spectacular decision against iPhone-maker Apple, which was handed a record 14 billion-euro tax bill over its arrangements in Ireland.
“The commission has missed an opportunity to tackle McDonald’s,” said Owen Espley, senior campaigner at War on Want, the complainant in the case.
“Our report showed that it is dodging over 1 billion euros across the EU. And it’s not just a question of paying fair taxes -– McDonald’s is not paying fair wages either,” he added.
In May, European and US labor unions accused McDonald’s of choosing Britain as its new international tax hub in face of the crackdown in the EU.
This raised alarms that the company was seeking to benefit from Brexit.
