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Did McDonald's Dodge Over $1 Billion in Taxes?

A coalition is accusing the chain of using a tax loophole in Luxembourg.


Trade Unions are accusing Mcdonald's — which has been struggling financially as of late — of taking advantage of a loophole to avoid paying over one billion euros ($1.13 billion USD) in taxes in Europe. According to Bloomberg, a new report from a coalition of European and U.S. labor groups alleges that the chain "routed billions of euros in royalties from its European operations" due to a gap in tax laws in Luxembourg.

Reuters writes that McDonald's dodged paying taxes by "having restaurants make tax-deductible royalty payments... to a lightly taxed subsidiary in Luxembourg." The group believes that this setup "is likely to have cost European governments over 1 billion euros in lost tax revenues between 2009 and 2013." Records show that McDonald's paid just 1.4 percent in taxes on profits of $288 million in 2013. The coalition is upset because this number is drastically lower than the the typical Luxembourg corporate tax rate of 29 percent. They are calling for an investigation into the chain by the European Commission.

McDonald's joins a relatively lengthy list of American corporations that have come under fire for using European tax breaks on the sly. The list includes Starbucks, which was accused by authorities from the European Union last year of making a sketchy tax deal with the Netherlands. A report accused the Netherlands of allowing Starbucks to pay lower taxes, giving it an unfair advantage over other countries in the EU. Starbucks also received flack last year for the low corporate taxes it paid in Britain.