A damning new report has revealed that fast food giant McDonalds avoided over €1 billion in tax between 2009 and 2013.
The report outlines how the company moved its European headquarters from the UK to Switzerland and used intra-group royalty payments, channelled into a tiny Luxembourg based subsidiary with a Swiss branch, to avoid paying the full rate of corporation tax in a number of European countries including the UK, Spain and Italy.
Low tax rate
According to the company's accounts, between 2009 and 2013, the Luxembourg-based structure, which employs just 13 people, registered a revenue of €3.7 billion, on which it reported a meagre €16 million in tax.
Filings in Luxembourg show that in 2013 alone McD Europe Franchising Sarl, received over $1 billion in fees from franchisees and McDonald's subsidiaries across Europe.
In addition it paid tax of just 1.4 percent on profits of $288 million in 2013 -- well below the headline Luxembourg corporate tax rate of around 29 percent.
The report is co-authored by EPSU, EFFAT, and SEIU– a coalition of European and American trade unions, representing 15 million workers in different sectors of the economy across almost 40 countries - as well as UK-based campaign group War on Want.
“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.
In the UK
In the UK the company is thought to have avoided around £75 million in tax. The company has disclosed that between 2009 and 2013 it paid £294.2 million in franchise rights fees offshore.
The researchers say that if these franchise rights fees were subject to taxation in the U.K. at the prevailing corporate tax rate, McDonald’s would owe an additional £75.7 million in unpaid taxes over the past five years.
However they go on to say that:
"... the U.K. has been significantly impacted by the decision of McDonald’s management to relocate the company’s European headquarters to Switzerland in 2009. If McDonald’s had maintained its European headquarters in London and paid U.K. tax on royalties earned from its European subsidiaries, the royalties that have since been received by McD Europe Franchising Sàrl would have been subject to a much higher rate of tax. If all of the royalties actually received by McD Europe Franchising Sàrl between 2009 and 2013 were taxed in the U.K. instead, McDonald’s would have owed up to £818.7 million in tax."
McDonald’s has faced widespread criticism in Europe and globally for the low wages and poor working conditions at its restaurants.
In the U.K., for example, workers have protested McDonald’s practice of “zero-hours contracts”, which leaves workers without any guarantee of regular work or stable income.
The company’s low wages have also been criticised for imposing substantial costs on taxpayers, as many McDonald’s workers are forced to rely on public assistance, such as working tax credits, to afford basic living expenses.
The campaigners are now calling on the European Commission and national tax authorities, as well as the European Parliament's newly formed Special Committee on Tax Ruling, to look closely into McDonald’s tax practices and take appropriate measures.
McDonald's European office had no immediate response when asked for comment by Reuters. Previously, the company said it followed tax rules in the different jurisdictions where it operates.
Ethical Consumer will be covering fast food restaurants in the next edition of the magazine due out in April.
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