McDonald’s Corporation (NYSE:MCD) could have to make payments to the European Union (EU) amounting to $500 million.
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The European Union’s top competition regulator stood by her decision to demand more than $14 billion in tax repayments from Apple Inc. and tweeted that she may investigate other major U.S. companies, ahead of meetings with officials in Washington. It has been looking into the fast-food giant’s tax arrangements with the Grand Duchy of Luxembourg since 2014 and opened a formal probe at the end of previous year, on similar grounds.
Also on Monday, EU officials also appeared to respond to critics that they were unfairly targeting American companies by announcing they were also investigating whether a French company signed a sweetheart tax deal with Luxembourg.
Margrethe Vestager, the EU’s commissioner for competition, on Monday will meet with US Treasury Secretary Jacob J. Lew; Federal Trade Commission Chairwoman Edith Ramirez; Senator Orrin Hatch of Utah, chairman of the Senate Finance Committee; and other key lawmakers. Lew has said the EU’s use of state-aid rules was “not appropriate”.
Now, The Financial Times claims that McDonald’s could be ordered to pay £400 million to the government of Luxembourg, after a probe reportedly found that the fast food behemoth paid an average of 1.49 percent tax on $1.8bn of profit. That holding company was set up “to receive royalty payments for know-how and branding from restaurants in Europe and Russian Federation”, the FT said.
Another example of multinational corporations that do not pay their fair share of taxes is Verizon, which has on average paid only 12.4 percent tax on $121 billion in USA profits. They owe up to $700 billion in back taxes on those profits. McDonald’s has paid taxes at a rate of 1.49% in Luxembourg, which is significantly lower than the country’s tax rate of 29.2%.
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As such, a (roughly) similar situation to that with Apple arose, whereby the company was able to avoid paying taxes in either Europe or the U.S.as long as it held off from repatriating them: in 2013, the IRS had examined the relevant McDonald’s entity in 2013 and had established that it didn’t have the competence to tax it.
