Here’s How McDonald’s Avoided $1.2B In European Taxes After Shifting Operations To Luxembourg

McDonald’s Luxembourg

A coalition of European and American trade unions has accused McDonald’s of skirting European taxes after the company altered the way it channels royalty payments from its restaurants in 2009. In a report released Wednesday, the group said the world’s largest restaurant chain avoided paying 1.06 billion euros ($1.2 billion) over five years by moving its European headquarters from the U.K. to Switzerland and channeling royalty revenue through a tiny Luxembourg-based subsidiary.

This and other strategies that allow companies to avoid European and U.S. taxes are employed by many multinational corporations. European Union authorities have criticized Ireland, the Netherlands and Luxembourg for cutting deals with companies such as Apple, Starbucks and Fiat Chrysler Automobiles.

“It is shameful to see that a multibillion-euro company that pays low wages to its workforce still seeks to avoid its responsibility to pay its fair share of much-needed taxes to finance public services we all rely on,” Jan Willem Goudriaan, general secretary of the European Federation of Public Service Unions (EPSU), said in a prepared statement.

In 2013, for example, McDonald’s collected 833.8 million euros ($947.2 million) in European royalties but paid 3.3 million euros ($3.7 million) in taxes on this revenue, or 0.4 percent, instead of the 229.5 million euros ($260 million) it would have paid in the countries where the royalties originated, or 27.5 percent.

McDonald’s spokeswoman Becca Hary said in an email Wednesday that the company is abiding by all applicable laws, “including payments of the taxes that are owed in each country in which we operate. In addition to paying taxes on profits, we pay significant taxes for employee social contributions, property taxes on real estate and other taxes as required by law.”