Now that McDonald’s has agreed to pay France a blockbuster 1.25 billion in back taxes and fines, labor unions are calling the settlement a success for union activism in the corporate tax space.
The story dates back to 2015, when a coalition of European and U.S. labor organizations (the European Federation of Public Service Unions; the European Federation of Food, Agriculture, and Tourism Trade Unions; and the Service Employees International Union) and the U.K.-based antipoverty organization War on Want accused McDonald’s of avoiding over 1 billion in taxes in Europe by purposefully restructuring its European operations to take advantage of favorable tax rates in specific countries.
The groups were concerned about some restructurings McDonald’s undertook in 2009 to move its European headquarters from the United Kingdom to Switzerland and route its intellectual property to a new IP holding company based in Luxembourg.
At the time, Luxembourg had just implemented an attractive IP box regime that substantially reduced tax rates on IP income. Those moves allegedly helped McDonald’s evade 1 billion in taxes between 2009 and 2013, the coalition said in a 2015 report titled “Unhappy Meal.”
The report alleged that the Luxembourg subsidiary — McDonald’s Europe Franchising S.à.r.l. — received more than 3.7 billion in royalties during that five-year period but paid only 16 million in taxes. By 2013 the subsidiary’s effective tax rate was a meager 1.4%, according to the coalition.
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