McDonald’s pays 1.25 billion euros to avoid lawsuits in France

A salty addition for McDonald’s to avoid a lawsuit: the fast food giant has agreed to pay 1.25 billion euros in France and thus escapes criminal prosecution for tax evasion between 2009 and 2020.

The president of the Paris court, Stéphane Noël, validated Thursday the payment by McDonald’s of a fine of public interest of 508 million euros, accepted by the fast food group. On the occasion of this hearing, it was announced that McDonald’s had also approved in May the payment of 737 million euros to the tax authorities to settle its corporate tax evaded by this scheme of tax evasion.

This legal agreement of public interest (Cjip) concluded with the National Financial Prosecutor’s Office (PNF) is the most important in France to date in terms of tax evasion.
McDonald’s on Thursday welcomed the “end” of a dispute “without admission of fault” and assured “everything to do to comply with the laws”. The multinational had provisioned $500 million in its accounts for the first quarter of 2022.

“A real sanction, both symbolically and economically”

The preliminary investigation was opened by the PNF in January 2016 following complaints from the McDonald’s Ouest Parisien works council and the CGT McDonald’s Ile-de-France, and entrusted to investigators from the Central Office for the Fight against corruption and financial and tax offenses (Oclciff). During more than six years of investigations, the justice established that the restaurant chain, in the crosshairs of the tax authorities since 2014, had artificially reduced its profits in France from 2009 by means of royalties for the exploitation of the McDonald’s brand paid by the restaurants to the European parent company based in Luxembourg.

This “led to absorbing a large part of the margins generated by French restaurants and to reducing the taxes paid in France by the various structures of the French group”, noted the president of the judicial court. The national financial prosecutor, Jean-François Bohnert, pointed out that the public interest fine had been set at the “maximum amount” possible. The whole agreement represents “2.5 times the amount of tax evaded” by the group, 469 million euros, according to him, or a “real sanction, both symbolically and economically”.

This “agreement confirms the particular effectiveness of the Cjip, particularly in terms of corporate taxation, where the financial penalty is the most appropriate way to respond to transnational fraud”, insisted Mr. Bohnert. This agreement does not provide for a compliance program, a complementary measure to the public interest fine practiced when the facts concern corruption.

An agreement that “meets a dual requirement of tax fairness and justice”

But “McDonald’s is in the process of negotiating a prior transfer pricing agreement with the various countries concerned to ensure or regulate the way in which these royalty rates” questioned in the context of this procedure “will be established in the future. “, underlined Antoine Jocteur-Monrozier, deputy prosecutor of the PNF.

The Directorate General of Public Finance (DGFip) welcomed in a press release an agreement which “meets a double requirement of tax fairness and justice”. “McDonald’s did not hesitate to pay taxes in France, 2.2 billion over the entire period”, underlined Me Eric Dezeuze, lawyer for the fast-food giant.

The CGT McDonald’s Paris and Ile-de-France applauded in a press release on Wednesday a “historic victory” over a system that allowed McDonald’s “to avoid the allocation of employee participation bonuses, in the absence of profits, and not to not pay the tax which the brand should have paid. Their lawyers, Me Eva and Caroline Joly, had indicated that the employees could take civil action to obtain compensation for their damage.

Thursday, a coalition of European and American unions and an association for the fight against British poverty spoke of a “snub” for McDonald’s and a “victory” for employees. Several former senior executives of the group had been placed in police custody in this case without being prosecuted at the time, including Denis Hennequin, CEO in 2009 of McDonald’s Europe, Jean-Pierre Petit, CEO of the brand in France , and Salvatore Perri, former Managing Director France and Southern Europe.
In September 2018, the EU deemed the advantageous tax treatment granted by Luxembourg to McDonald’s legal, thus sparing the king of the Big Mac, unlike other American giants, such as Apple, condemned to reimburse unpaid taxes.

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