News
Julia Irvine 18 May 2018 08:11am

Unions accuse McDonald's of continuing tax avoidance

A group of European and US trade unions has accused international fast food chain McDonald’s of responding to criticism three years ago over tax avoidance by adopting an even more opaque and complex tax structure

According to the group’s report, Unhappier Meal, in the past three years McDonald’s has relocated its international tax base to the UK and transferred the headquarters of McD Europe Franchising Sàrl from Luxembourg to Delaware, “a jurisdiction with very limited disclosure requirements”.

Furthermore, it has “interposed a range of subsidiaries in multiple jurisdictions between the newly named McD Europe Franchising LLC and its holding subsidiaries with the effect of reducing the level of transparency and information available in McDonald’s public filings”.

And it also accuses the group of using tax havens, including the Cayman Islands, Bermuda and Hong Kong to help minimise its taxes.

“This new corporate structure effectively inhibits public scrutiny, as many of the new entities have no or minimal required public financial disclosures, including of taxes owed and paid,” the report says.

“Further, McDonald’s particular decision to relocate to the UK after that country voted in a referendum to leave the EU raises the possibility of McDonald’s structuring its intellectual property holdings to minimise any oversight by the European Commission.”

The report follows up on an earlier exposé by the three unions – EFFAT (the European Federation of Food, Agriculture and Tourism Trade), EPSU (the European Public Service Union) and SEIU (the Service Employees International Union) – and the charity, War on Want, called Unhappy Meal.

Thanks to the group’s structure, they alleged, between 2009 and 2013 it was able to avoid an estimated €1bn in corporation tax that otherwise would have been paid on royalties generated in 12 different EU countries.

In publishing the second report, the unions, which represent 15 million workers in 40 countries including many of McDonald’s 1.9 million employees, are hoping to encourage governments to open new investigations into McDonald’s tax practices. They also hope to put pressure on the European Commission’s own ongoing investigation into how much McDonald’s has benefited from state aid.

It also wants to see governments across the world adopting country-by country-reporting and other anti-tax avoidance regulations.

McDonald’s issued an immediate and robust response to the report, pointing out that it pays all the tax owed in each market where it operates and contributes significant amounts of corporate taxes.

“From 2013-2017, McDonald's paid more than $2.5bn (£1.85bn) in corporate taxes in the European Union, with an average tax rate approaching 27%. Additionally, we pay social, real estate and other taxes,” a spokesman said.

“In 2017 McDonald’s established a new international holding company structure in the UK to manage various franchising and intellectual property rights outside the US. This change aligned our corporate structure with our new functional structure which is no longer in geographies, but in segments that group together countries with common market and growth characteristics.

“This new international holding company structure is domiciled in the UK for tax purposes.”

Meanwhile, a group of seven cross-party MPs has sponsored an early day motion welcoming publication of Unhappier Meal and calling on government to ensure that companies operating in the UK cannot use opaque structures based domestically or overseas to avoid paying in full their proper share of tax.

 

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