McDonald’s pays 1.25 billion euros and avoids a tax evasion lawsuit

A salty addition for McDonald’s to avoid a lawsuit: the fast-food giant has agreed to pay 1.25 billion euros (around $1.7 billion) in France, avoiding prosecution for tax evasion between 2009 and 2009 2020

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Paris court president Stéphane Noël on Thursday confirmed McDonald’s payment of a 508 million euro ($690 million) fine, which was accepted by the fast-food group.

During this hearing, it was announced that McDonald’s would also pay 737 million euros (approximately $1 billion) to the tax authorities for corporate income tax evaded through this tax evasion scheme.

This legal agreement of public interest (Cjip) concluded with the Public Prosecutor’s Office of Finance (PNF) is the most important in France so far regarding tax evasion.

McDonald’s welcomed the “end” of a dispute “without admission of guilt” on Thursday and pledged “to do everything possible to comply with the law”. The multinational had provided $500 million in its accounts for the first quarter of 2022.

The investigation was opened by the PNF in January 2016 following complaints from the works council of McDonald’s Ouest Parisien and the CGT McDonald’s Île-de-France and investigators from the Central Office for Combating Corruption and Financial and Tax Crimes (Oclciff ).

Since then, the judiciary has found that the restaurant chain, which has been in the crosshairs of tax authorities since 2014, had artificially cut its profits in France from 2009 through royalties for the exploitation of the McDonald’s brand paid by European mother-based restaurants in Luxembourg.

In France, this led to “absorbing a large part of the margins earned by the restaurants and reducing the taxes paid by the various structures of the group”, the President of the Court noted.

While everyone at the hearing hailed the “collegiality” of the work that led to this agreement, Oclciff boss Guillaume Hézard remarked to AFP that “the collaboration with McDonald’s is very late, it dates from 2020”, after a “long” and “complex” investigation “that pushed the company to its limits” and resulted in it reaching an agreement rather than ending up in court.

National Treasury Prosecutor Jean-François Bohnert pointed out that the fine had been set at the “maximum possible amount” in the public interest.

The apostle of the Cjip, sometimes criticized, defended this agreement, which in total represents “2.5 times the taxes evaded by the group” or, in his opinion, a “real sanction, both symbolic and economic”, allowing “response to cross-border fraud”.

McDonald’s “is also negotiating a prior transfer pricing agreement with the various countries involved to ensure or regulate how these royalties are determined in the future,” said Antoine Jocteur-Monrozier, PNF assistant prosecutor.

In a press release, the Directorate-General for Public Finances (DGFip) welcomed an agreement that “addresses a double call for tax equity and tax justice”.

Regarding Cjip, the absolute record is Airbus, which agreed to pay 2.1 billion euros in 2020 to avoid prosecution for corrupt acts. In this case, however, the aircraft manufacturer was in a process of cooperation with the judiciary from the start, according to the source close to the file.

“This decision opens up the possibility of civil remedies for employees, which they will almost certainly win due to the fault of their managers who have denied them the opportunity to participate,” said Éva Joly, an attorney for his daughter Caroline the plaintiffs.

“With this system, we were doomed to not being able to touch the fruits of our labor,” recalled Gilles Bombard, former works council secretary, who reiterated the complainants’ intention to open “a new procedural part” at the Individual level”.

On Thursday, a coalition of European unions (EPSU, EFFAT) and American unions (SEIU) spoke of a “snub” for McDonald’s and a “victory” for the workers.

According to the PNF, thirteen people had been taken into custody, including Denis Hennequin, CEO of McDonald’s Europe in 2009, Jean-Pierre Petit, CEO of the sign in France, and Salvatore Perri, former general manager of France and Europe from the South.

Will they be prosecuted, now disfellowshipped for their then employer? Several sources interviewed by AFP on Thursday appeared to doubt it.

In September 2018, the EU ruled that Luxembourg’s preferential tax treatment for McDonald’s was legitimate.

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