More than 250 million Big Macs is the amount that the fast-food chain McDonald’s is ready to pay to avoid prosecution in France. Indeed, the world leader in fast food has agreed to pay a fine of 1.245 billion euros to France so as not to be prosecuted for tax evasion.
A business that started in 2016
As a reminder, the McDonald’s restaurant chain has been in the crosshairs of the French tax authorities since 2014. French justice is suspicious of royalties paid to the European parent company McDonald’s based in Luxembourg. The latter would have actually made it possible to artificially lower the profits of McDonald’s in France. A first investigation had therefore been opened in 2016 by the PNF following the complaint of certain elected union officials against McDonald’s France for “laundering tax fraud in an organized gang”. Subsequently, a search took place at the headquarters of McDonald’s France.
The advantageous tax treatment granted by Luxembourg to McDonald’s had been deemed legal, in September 2018, by the European Union. This had allowed the burger giant not to be condemned to reimburse unpaid taxes. Several former senior leaders of the group were finally placed in police custody without being prosecuted in 2021.
A misconduct admitted by McDonald’s
With around 1,500 points of sale in France, France is the world’s second-largest market for the fast-food chain McDonald’s. It is also important to remember that it is the franchisees who manage their own brand in our country, as in the rest of the world. Why is this important? Because the multinational’s franchisees pay part of their turnover to McDonald’s France, which itself transfers these royalties to the Netherlands and Luxembourg. It should also be remembered that these two countries are tax havens for European brands, but this remains legal.
⚡FLASH- #Justice : A Parisian judge must rule on Thursday on an agreement by which McDonald’s France agrees to pay more than a billion euros in fines to avoid criminal proceedings for tax evasion. #McDonalds pic.twitter.com/0jw20dORzn
— FranceNews24 (@FranceNews24) June 15, 2022
McDonald’s is therefore suspected of having used this method to avoid paying too high taxes on profits on turnover made in France. If you want to compare, the tax in Luxembourg is 2% against 33% in France. As mentioned above, the preliminary investigation that began in 2016 has therefore highlighted the fact that the royalties set by McDonald’s to its franchisees were too high.
In order to avoid a long trial likely to tarnish the image of the American firm, McDonald’s has agreed to go through a judicial Convention of public interest (Cjip). In short, it allows McDonald’s to plead guilty without actually doing so.
Towards an end to dubious practices?
In any case, that is what we can hope for! Indeed, this controversy has highlighted the questionable methods of McDonald’s. The French State but also the employees of the company were penalized by these actions which made them lose money.
After the announcement of the fine of 1.245 billion euros against McDonald’s, CGT McDonald’s Paris and Ile-de-France hailed a “historic victory”. She also insisted that employees had been “double victims” of McDonald’s actions: “As workers, we cannot reap the fruits of our labor; as citizens, we check out to pay the tax that McDonald’s doesn’t pay. “.
🔵 The encryption of the agreement is validated by the judge:
◾Cumulative amount of tax evaded: €469m
◾Tax fine: €508,482,964
◾Criminal fine: €737,141,305
🔴Total Public Interest Fine:
McDonald’s avoids criminal charges for tax evasion. pic.twitter.com/2znTOvJ9OR
— Luis Reygada (@luis_reygada) June 16, 2022
If the French justice accepts the agreement concluded between McDonald’s and the PNF, the American firm will therefore have 10 days to pay the fine of 1.245 billion euros to the Treasury. Even if these practices continue to exist, it is however a great step forward according to Eva and Caroline Joly explaining that “The size of the fine is dissuasive” and risks “changing the practices of large groups” in terms of transfer pricing. .