A just-released report by several trade unions says European tax authorities might want to give McDonald’s accounting books a perusal. “Unhappy Meal,” as the document is titled (of course), lays it all out: McDonald’s Europe allegedly uses a loophole in Luxembourg to dodge taxes it probably should be paying in larger European markets like England, France, and Italy. By cleverly funneling revenue “into a tiny Luxembourg-based subsidiary with a Swiss branch,” the report claims, McDonald’s has conveniently avoided paying more than $1 billion in taxes between 2009 and 2013.
Tax filings in Luxembourg, for example, show an entity called “McD Europe Franchising SARL” paid just 1.4 percent in taxes on $288 million of profits in 2013, an amount Reuters notes is “well below” Luxembourg’s usual corporate rate of about 29 percent, and which the report suggests is an illegal “preferential tax deal.” It further claims the chain routed revenue through the subsidiary by having locations all over Europe make sneaky tax-deductible royalty payments to it. Documents leaked last November reveal Luxembourg may have set up cushy tax arrangements with hundreds of corporations, including PepsiCo and Ikea, and McDonald’s may also be benefiting from basing many of its operations in Switzerland, another known tax haven.
A spokesperson for the chain, meanwhile, denies any wrongdoing, telling Reuters Mickey D’s pays all of the European taxes it owes on profits made there plus “significant taxes for employee social contributions, property taxes on real estate, and other taxes as required by law.” But then again, what else would they say?