European McTax Corporation Tax Deal sees burger giant moving European tax receipts to Britain
A Big Mac: At the point of purchase in your local branch, 20% VAT on each order. As for rest, ssshhh… Image by Pamela D. Maxwell (via Shutterstock).
Who’s lovin’ this story? In a corporate shake-up, the McDonald’s Corporation have decided to scrap their Luxembourg tax structure. Instead of funnelling £800m of income from its European branches through Luxembourg, they have decided to switch the receipts towards British shores. Instead of avoiding European tax rates through a shell company, the HMRC will gain with McDonald’s. So, out goes a favourable tax deal in the Duchy’s country, in lieu of favourable Corporation Tax rates.
What had piqued McDonald’s is a recent inquiry by the European Union over their tax dealings. There had been rumours of a sweetheart tax deal from the Grand Duchy’s tax office in 2009. The global fast-food giant had formed McDonald’s Europe Franchising Sarl (MEF), which may have alerted EU officials.
In the shell company’s last set of financial results [for 2015], they made a pre-tax profit of £426m. The amount of tax paid? A little over three million pounds. The rate of Corporation Tax in Luxembourg is 29%, which means McDonald’s Europe Franchising Sarl should have paid £123.5m. If based in the UK, and subject to the present rate of 20%, £85.2m. Any of these figures could have stopped the Don Valley Stadium from turning to rubble.
Could McDonald’s decision have been affected by the UK’s June referendum result? Could a low tax Britain, post-Article 50 see similar decisions taken by multinational companies, should the EU tighten the screws on tax deals? Is anyone telling whoppers? No, wait, that’s another burger chain… just the name of their popular premium priced hamburger.