McDonalds Corp (MCD)

[Pro-Life]

EU Hits McDonald's With Full-Blown Tax Investigation
Date : 12/03/2015 @ 7:30AM
Source : Dow Jones News

http://ih.advfn.com/p.php?pid=nmona&article=69573581

BRUSSELS—European Union regulators confirmed Thursday they have opened a full-blown probe into McDonald's Corp.'s tax affairs in Luxembourg, warning that a tax deal granted to the fast-food chain in 2009 may have reduced its tax burden in violation of EU law.

The move embroils a fourth U.S. multinational in a widening tax investigation that is a priority for policy makers in Brussels, but has drawn criticism from the U.S. government.

The European Commission, the bloc's top antitrust regulator, said it would examine whether a 2009 tax ruling granted to McDonald's Europe Franchising, a Luxembourg unit that collects royalty fees from restaurants in Europe and Russia, had departed from national tax laws.

The commission's preliminary view is that the tax ruling "may have granted McDonald's an advantageous tax treatment in breach of EU state-aid rules," it said.

"McDonald's Europe Franchising has virtually not paid any corporate tax in Luxembourg nor in the U.S. on its profits since 2009," the commission said in a statement.

The EU has been examining whether companies including Amazon.com Inc. and Apple Inc. have benefited from illegal tax deals in Europe that allegedly shift profits from one corporate division to another to avoid tax.

The EU's antitrust chief Margrethe Vestager said the McDonald's ruling "has to be looked at very carefully."

"The purpose of double-taxation treaties between countries is to avoid double taxation—not to justify double non-taxation," Ms, Vestager said.

The commission will now carry out a full-blown investigation to establish whether its preliminary view is correct. If so, McDonald's could face sizable demands for back taxes.

The latest probe follows a report earlier this year by U.S. and European trade unions claiming that McDonald's had avoided about €1 billion ($1.06 billion) in taxes between 2009 and 2013 by funneling royalties to Luxembourg. According to the report, the company underpaid around €194 million of taxes in Luxembourg over the same period.

Over the past 18 months, the EU has opened formal investigations into tax deals struck by Amazon and Fiat Chrysler Automobiles NV in Luxembourg, Apple in Ireland and Starbucks Corp. in the Netherlands, as well as a Belgian tax discount plan that has benefited Anheuser-Busch InBev NV and a number of other Belgian-based multinationals.

All of the governments involved have denied giving special treatment, and the companies have denied receiving it.

Two of those probes were closed in October, when the EU ruled that Starbucks and Fiat had benefited from illegal tax deals.

Write to Tom Fairless at [e-mail]