You can be on Entrepreneur’s cover!

Unions, Charity Accuse McDonald's of Avoiding $1.1 Billion in Tax In Europe, the fast-food giant is accused of routing revenues through a Luxembourg unit.

By Reuters

entrepreneur daily

This story originally appeared on Reuters

Monica Dipres

Labor unions and a charity accused fast food chain McDonald's of avoiding around 1 billion euros ($1.1 billion) in tax between 2009 and 2013 by routing revenues through a Luxembourg unit and called on the European Commission to investigate.

Corporate tax avoidance has become a hot political issue in Europe and the EU executive has opened investigations into tax deals that some countries have cut with multinationals, including deals between Luxembourg and carmaker Fiat and online retailer Amazon.com.

Umbrella organizations for unions representing millions of workers in the United States and Europe and charity War on Want, called on the Commission to expand that investigation to include McDonald's.

The European Federation of Public Service Unions and The Service Employees International Union said McDonald's saved on tax by having restaurants make tax-deductible royalty payments equivalent to five percent of turnover to a lightly taxed subsidiary in Luxembourg.

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.

In 2012, a Reuters investigation revealed that fast food restaurants including Burger King, Subway and McDonald's reduced their European tax bills by having their restaurants send royalty payments for the use of brands and know-how to low tax jurisdictions.

Filings in Luxembourg show that McD Europe Franchising Sarl, received over $1 billion in fees from franchisees and McDonald's subsidiaries across Europe in 2013.

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 labor groups said the low tax rate could be due to the use of tax breaks for exploiting intellectual property, although the company could also benefit form the fact that many of its operations are through its Swiss branch.

By routing profits linked to patents or brands to Swiss branches or subsidiaries, companies can achieve low single digit effective tax rates, lawyers have told Reuters.

The civil society groups said the 1 billion euros tax saving they alleged, reflected what might have been paid if the royalties were retained in countries like France and Britain and taxed there.

(Reporting by Tom Bergin in London and Foo Yun Chee in Brussels; Editing by Keith Weir)

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Dad Started a Side Hustle to Save for His Daughter's College Fund — Then It Earned $1 Million and Caught Apple's Attention

In 2015, Greg Kerr, now owner of Alchemy Merch, was working as musician when he noticed a lucrative opportunity.

Business News

I Designed My Dream Home For Free With an AI Architect — Here's How It Works

The AI architect, Vitruvius, created three designs in minutes, complete with floor plans and pictures of the inside and outside of the house.

Business Ideas

7 Link-Building Tactics You Need to Know to Skyrocket Your Website's Rankings

An essential component of SEO, link building is not just a 'Set them and forget them' proposition, but a dance of skills and strategies.

Business News

This Fan-Favorite Masters 2024 Item Is Still $1.50 as Tournament Menu Appears Unscathed by Inflation

The pimento cheese sandwich is a tradition almost as big as the tournament itself.

Business News

Here's One Thing Americans Would Take a Pay Cut For — Besides Remote Work

An Empower survey found a high percentage of respondents would take a pay cut for better retirement benefits and remote work options.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.