EU Competition Commissioner Margrethe Vestager concludes in competition proceedings against Luxembourg that Luxembourg’s tax loopholes for McDonald´s have not violated EU state aid rules. The tax benefits are based on different interpretations in Luxembourg law and in US law concerning the definition of a permanent establishment. The corresponding double taxation agreement between Luxembourg and the US ultimately results in profits not being taxed three times. The licence payments to Luxembourg reduce the taxable profits of the restaurants and then the income is neither taxed in Luxembourg nor in the US. The EU Commission’s proposal for a common consolidated corporate tax base from 2016 contains an adjustment to the definition of permanent establishments in the EU. However, the proposal is stuck in the Council of Member States.
In the European Union, McDonald’s makes annual profits in the hundreds of millions without paying corporate taxes. In 2015, trade unions in the EU and the US had shown in a study how McDonald’s saved more than a billion euros in taxes between 2009 and 2013 through sophisticated corporate tax avoidance structures.
Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group,
calls for an end to tax loopholes with the US and other countries:
“Luxembourg and other EU countries are serving McDonald´s a happy meal with tax loopholes, and taxpayers must pay the bill.
Luxembourg and other Member Sstates must adapt their double taxation agreements. The triple non-taxation of profits due to an inadequate definition of permanent establishment must come to an end.
Mrs Vestager’s decision today makes it clear that competition law has reached its limits. The EU Commission must put forward a proposal on how the outflow of untaxed profits from the EU can be prevented. Europe needs its own model double taxation agreement achieving this purpose.
The German Federal Government must lobby in the Council for transparency in the fight against tax avoidance. Country-based tax transparency sheds light on tax tricks and reveals which companies pay which taxes where and who benefits from nebulous tax-dodging models. German Finance minister Olaf Scholz must end the blockade of the tax transparency proposals of the Commission.
McDonald´s has complicated its corporate structures since the EU Commission’s investigations began and is using new tax loopholes in Great Britain. In the Brexit negotiations, the European Union must insist that the UK, its crown colonies and overseas territories stop aiding tax avoidance. Only those who abide by fair tax rules can benefit from the European internal market.”
Commission press release on the McDonald’s decision:
Report on tax avoidance by McDonald’s 2018:
McDonald’s 2015 Tax Avoidance Report: