post Thursday January 30, 2014
After, Google, Apple, Amazon and Starbucks now McDonald’s is under fire for how they pay taxes. Over the past five years, McDonald’s France might have avoided paying taxes on around €2.2 billion of revenue.
The French magazine L'Express reported that the French Finance Ministry suspects McDonald's of diverting fees paid by franchisees to units in Luxembourg and Switzerland, avoiding some corporate taxes in France, where the rates are higher. McDonald’s would use a Luxembourg subsidiary called McD Europe Franchising SARL. Many franchisees in Europe pay a percentage of their annual revenue to the McD Europe Franchising SARL. This Luxembourg subsidiary pays an annual fee to the parent company.
McDonald’s acknowledged that the French restaurants pay royalties to the U.S- based parent company. But it said in a statement that it "firmly refutes" allegations that it excluded revenue from French taxes. McDonald's France and its franchises have paid €1 billion in corporate tax in France since 2009, the company said.
McDonald’s is defending all of this, McDonald's France vice president Alexis Bourdon said:
"McDonald's pays all of its taxes in France on the totality of its revenue, in line with current legislation."
McDonald’s has 1.258 restaurants in France and is the second-largest contributor to the company’s profits after the United States. Most of the restaurants, 80%, are franchised. For using the brand, restaurant decoration, information-technology systems and training staff the franchisees pay a license fee. These fees are accounted for as business expenses and they are deductible from corporate tax in France.
All the cases, Apple, Google, Amazon and Starbucks, show that the government of France is very strict. So other companies know what they have to do; obey the rules.
Source: Wall Street Journal , Bloomberg
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
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