McDonald's will pay €1.25 billion to settle a tax evasion case in France

The fast-food chain from the United States has agreed to pay €1.25 billion to settle a tax evasion investigation by the French government into its transfer pricing arrangements.

Following a June 16 ruling by the Tribunal de Paris, McDonald's will pay €1.25 billion ($1.31 billion) to the French tax administration ('le fisc').

McDonald's stated in a statement that it had already paid €2.2 billion in taxes during the time period in question. "This agreement ends a tax case and a judicial investigation without acknowledging fault," the company added.

"McDonald's France is working proactively with French tax authorities to agree the current and future level of brand and knowhow fees," the company stated.

The settlement included a €508 million public interest fine and €737 million in back taxes and penalties. Nonetheless, the settlement is insignificant in comparison to the alleged tax avoidance by the company.

McDonald's France is accused of evading €469 million in taxes by routing transactions through Luxembourg and Switzerland, eventually arriving in Delaware. The €1.25 billion sum was described by Chief Prosecutor Jean-Francois Bohnert as "a genuine punishment."

The president of the Paris tribunal, Stéphane Nol, said it was a "case of importance" and that he was "ery attached to the idea that financial justice must be a priority."

TP arrangements made by McDonald's France for commercial transactions between affiliates were highlighted by French authorities in the case, which spanned the years 2009 to 2020.

According to Gilles Bombard, general secretary of the General Confederation of Labour (CGT) of McDonald's in the Ile-de-France, the company expanded in France and opened dozens of restaurants during this time but did not make any money.

It took a year for French tax authorities to investigate the case after the initial complaint, which was filed in 2015 by trade union official Eva Joly. The documents were transferred to the office against corruption, a division of the police forces, by the Parquet National Financier (PNF), a French judicial institution dealing with financial crime.

According to the PNF, the French McDonald's was able to increase royalties from 5% to 10% in 2009 and move a significant portion of its profits overseas.

The company has 30 days to pay the full amount of €1.25 billion as a result of the fine, which is the second largest settlement in French legal history.

By fLEXI tEAM