McDonald’s may have to pay nearly $500m in back tax

Fast food restaurant McDonald’s could face an order to pay nearly $500 million (€448 m) in back taxes to Luxembourg, according to a Financial Times analysis of an investigation by Brussels into state-supported tax avoidance.

Last month the European Commission imposed a €13 billion tax penalty on Apple in Ireland, triggering a storm of protest from Washington and corporate America. As the commission steps up its crackdown on so-called sweetheart tax deals, two US multinationals – McDonald’s and Amazon – are potentially next in line.

According to a review of the commission’s McDonald’s probe, the company paid an average tax of 1.49 per cent on the $1.8 billion profit earned by its Luxembourg-based European headquarters since its 2009 reorganisation.

The fast-food chain is under investigation by Brussels over a tax ruling underpinning its European structure, which permitted McDonald’s to pay no corporation tax – either in the US or Luxembourg – on royalty income from restaurant franchises across Europe. Luxembourg and McDonald’s deny any wrongdoing.

If the standard Luxembourg tax rate of 29.2 per cent applied to those earnings – following the broad principles the commission applied in the Apple case – McDonald’s would owe the Grand Duchy nearly half a billion dollars.

– Copyright The Financial Times Limited 2016