McDonald's could pay more than a billion euros to avoid lawsuits in France

The equivalent of hundreds of millions of Big Macs: under an agreement, McDonald’s has agreed to pay more than one billion euros. This fine, proposed by the National Financial Prosecutor’s Office (PNF) in the framework of a Judicial Convention of Public Interest (CJIP), is yet to receive the approval of a judge at the headquarters on Thursday morning. This payment will allow the fast food giant to avoid criminal prosecution for tax fraud.

“The use of the brand”

Its amount “exceeds one billion euros,” said a source close to the case, partially confirming information from several media outlets. The record is set by Airbus, with a € 2.1 billion fine paid in early 2020. McDonald’s could also accept a compliance program to avoid recidivism.

Also read: Switzerland is creating a specific tax league for large companies

The French court suspects that the brand, which has been in the tax authorities since 2014, has artificially reduced its profits in the Hexagon through royalties paid to its European parent company based in Luxembourg. This practice of “transfer pricing” can be a “tax spring used” within the same group, which “is used exclusively to evade tax,” says the source close to the case.

In the case of McDonald’s, these transactions involved fees for the “use of the US brand” by franchised stores with amounts that, from one establishment to another, “could double without being justified by what that is, it has been proven that it was done “exclusively” for tax purposes, “the source added.

A preliminary investigation was opened by the PNF in early 2016, following the filing of a complaint by union elected officials against McDonald’s France for “laundering tax fraud in an organized gang.”

Read more, in 2016: A new report denounces McDonald’s aggressive tax practices

The fine that the PNF could get paid is “colossal,” says former anti-corruption magistrate Eva Joly, who has become a lawyer for the plaintiffs, along with her daughter Caroline Joly. Contacted by telephone, the two councils expressed hope that the CJIP would be approved on Thursday.

This block could not be recognized: catchphrase

However, Eva Joly saw this Cjip as a “bad move”. The procedure would merit “a public debate, a real hearing with all those responsible.” But given the state of justice in France and its size, making a decision fifteen years after the facts does not make sense, “she said.

Search and detention

CGT McDonald’s Paris and Ile-de-France welcomed in a statement this “historic victory” over a system that allowed McDonald’s to “avoid awarding participation bonuses to employees in the absence of profits.” and not to pay the tax that the sign should have paid. ” Their lawyers said employees could take civil action for damages.

In September 2018, the European Union ruled that Luxembourg’s favorable tax treatment of McDonald’s was legal, sparing the king of the Big Mac, unlike other US giants such as Apple, which were ordered to pay unpaid taxes. As part of the investigation in France, McDonald’s was searched in May 2016 at its headquarters by investigators from the Central Office for the Fight against Corruption and Financial and Tax Offenses (Oclciff).

Several former leaders of the group had been remanded in custody in early 2021 without being prosecuted, including Denis Hennequin, CEO in 2009 of McDonald’s Europe, Jean-Pierre Petit, CEO of the brand in France, and Salvatore Perri, former CEO of France and Southern Europe.

Also read, in 2015: McDonald’s escapes tax thanks to a Swiss branch

As in other cases where a CJIP is proposed for the company, its executives or ex-executives may agree, in case of recognition of possible involvement in the offenses, to appear in a guilty plea at the French (CRPC). McDonald’s France, like the PNF, did not respond to requests from the AFP agency on Wednesday.

At the time of custody, the group had stated that the brand “paid all taxes due in accordance with applicable law” and was “among the largest contributors to corporate tax” in France. In its first quarter 2022 accounts, McDonald’s set aside $ 500 million for a “potential settlement related to an international tax issue.”

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