Mcdonald’s set to pay $1.3B to settle French tax dispute
PARIS — Mcdonald’s agreed to pay over $1.3 billion in fines and back taxes in France on Thursday to settle a long-running tax dispute, ending an inquiry into whether the American fast-food giant had diverted profits out of the country to pay lower taxes between 2009 and 2020.
The settlement, reportedly a record penalty for a corporation in France, is made up of a fine of about $536 million and $778 million in back taxes. It follows a similar $1 billion settlement reached between French tax authorities and Google, now Alphabet, in 2019 to close an investigation in which prosecutors accused the company of unfairly shifting profits.
France is the second-largest market for Mcdonald’s after the United States. The American burger chain has been in the crosshairs of French tax authorities since 2014, around the time trade unions began sounding the alarm about suspected tax evasion by Mcdonald’s in Europe.
French prosecutors said the company, Mcdonald’s
France, reduced its tax bills for a decade by shifting royalties to its European parent company in the ultralow tax haven of Luxembourg.
Mcdonald’s began the accounting moves at a time when royalties paid by its French restaurants to Mcdonald’s France were rising, according to prosecutors. Sending the royalties to the Luxembourg entity enabled the European parent company to “absorb a large part of the margins generated by French restaurants,” the Paris judge overseeing the case, Stephane Noel, said Thursday. That allowed Mcdonald’s to “reduce taxes paid in France through the various structures of the French group,” the judge said.
French police raided the Mcdonald’s French headquarters in 2016 as part of the investigation.
Lawyers for the fast-food company said the payment did not amount to an admission of guilt. “It’s a judicial agreement to avoid a trial, which is a lengthy and inevitably uncertain process,” said Denis Chemla, the lawyer for Mcdonald’s.
Mary Kay Henry, president of the Service Employees International Union, which has criticized Mcdonald’s tax practices for years, hailed the ruling.
“Mcdonald’s relies on a business model that exploits stakeholders across its system — from workers to taxpayers to consumers to franchisees,” she said in a statement. “This historic fine by the French government is proof time is past for Mcdonald’s to become a responsible corporation that engages with workers and others instead of wringing every last ounce of profit from them.”
Mcdonald’s has 1,500 restaurants in France. Many are franchises that pay a licensing fee for use of the brand, information technology systems and the décor of its restaurants.
The company said in a statement that the agreement ends both tax and criminal cases against it and covered the use of its brand for the years from 2009-20. Mcdonald’s added it had paid more than $2.3 billion in French taxes during that time and provided almost 25,000 jobs.