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EU investigates alleged tax deal for McDonald's

Published 03/12/2015

The investigation will look into whether state aid rules were breached
The investigation will look into whether state aid rules were breached

The European Union is investigating allegations that fast food giant McDonald's received a tax deal from Luxembourg.

EU commissioner for competition Margrethe Vestager announced that the Luxembourg deal may have breached state aid rules, which seek to keep a level playing field for businesses across the 28 member states.

Ms Vestager said that "a tax ruling that agrees to McDonald's paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully."

The EU said that since 2009, McDonald's Europe Franchising paid no corporate tax in Luxembourg despite large profits. It said the profits were more than 250 million euros (£177 million) in 2013.

The EU said Luxembourg gave McDonald's "an advantage not available to other companies in a comparable factual and legal situation".

In October, the EU demanded that Starbucks and Fiat repay up to 30 million euros (£21 million) each in back taxes, in what was the start of a broad crackdown on favourable tax deals for multinationals.

Multinationals in Europe pay taxes in the country where they have their regional headquarters, and countries have long competed to lure the big companies.

Both Luxembourg and McDonald's denied any wrongdoing.

"McDonald's complies with all tax laws and rules in Europe and pays a significant amount of corporate income tax," the company said in a statement.

It added that in the 2010-2014 period McDonald's companies paid more than 2.1 billion US dollars (£1.4 billion) in corporate taxes in the EU, with an average tax rate of almost 27%

"We are subject to the same tax laws as other companies and are confident that the inquiry will be resolved favorably," the statement said.

Luxembourg's finance ministry said that "no specific tax treatment or selective advantage had been given to McDonald's".

Since the EU has targeted several US multinationals, Ms Vestager has been accused of singling out American companies.

"If you want to operate in the EU, you are subject to EU rules, EU competition rules and that is what ensures that you can compete on a level playing field," EU spokesman Ricardo Cardoso said.

"Any suggestion that we are specifically targeting US companies is unfounded and untrue. EU competition rules, including state aid rules, apply to all companies," he said.

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