Fast food giant faces tax probe

One of the world’s best-known brands is to face scrutiny over its tax affairs.

It was confirmed this week that the European Commission would be launching an investigation into deals that McDonald’s has struck with Luxembourg.

Officials allege that arrangements have allowed the fast food giant to avoid paying taxes in both Luxembourg and the US on royalties from Europe and Russia.

According to the Commission, McDonald’s Europe Franchising has paid no corporation tax in Luxembourg since 2009, despite recording substantial profits.

In 2013 for example, the company made more than £177million.

Commissioner Margrethe Vestager, who is responsible for the EU’s competition policy, said: “A tax ruling that agrees to McDonald’s paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules.

“The purpose of double-taxation treaties between countries is to avoid double taxation – not to justify double non-taxation.”

In a statement issued this week, the American-based restaurant chain said: “McDonald’s complies with all tax laws and rules in Europe and pays a significant amount of corporate income tax.

“In fact, from 2010-14, the McDonald’s companies paid more than $2.1bn just in corporate taxes in the European Union, with an average tax rate of almost 27 per cent.

“Additionally, we pay social, real estate and other taxes. Our independent franchisees, who own and operate approximately 75 per cent of our restaurants in Europe, also pay corporate tax and many other taxes.

“We are confident that the inquiry will be resolved favourably.”

The probe follows similar concerns about the way that a number of corporate titans, including Starbucks and Amazon, had organised their tax affairs.