Antitrust regulators and the European Union will investigate McDonald’s (NYSE:MCD) Luxembourg tax deals. The deals allow the fast food chain to avoid paying taxes on franchise royalties in Europe from 2009. The move could cause McDonald’s have to pay a hefty amount of back taxes.
The EU’s action comes two months after ordering Luxembourg to recover €30 million from automaker Fiat Chrysler (NYSE:FCAU) and the Netherlands was issued to do the same for Starbucks (NASDAQ:SBUX). The tax deals were viewed as unlawful.
According to the EU, McDonald’s has failed to pay corporate taxes in Luxembourg or the United States on any royalties paid out by franchisees in Russia and Europe since 2009.
The commission stated that McDonald’s Europe Franchising was exempt from having to pay taxes on income from Luxembourg as the profits were subject to U.S. taxes.
The issue is that the ruling was granted in 2009 when these profits were not being subjected to U.S. taxation. During a second ruling, Luxenberg stated that McDonald’s was not required to prove that its income was subject to U.S. taxation.
The move to investigate McDonald’s came after recent media reports of tax dodging evidence found by trade unions.
Scott Courtney, SEIU organizing director, stated that McDonald’s has been stashing billions of dollars in tax havens while “imposing poverty wages” on its workers. Courtney called for action and for the company to be held accountable for its actions.
The SEIU represents 2 million workers in the public sector, healthcare and property service workers in Canada, United States and Puerto Rico.