McDonald's to move tax base away from EU after Luxembourg scandal
Contributed by Daniel Heuer
28 December, 2016
Brexit be damned, McDonald's Corp recently announced that it would move its international tax base from Luxembourg to the UK after the EU scrutinized the tax arrangements McDonald's had in Luxembourg. The deals in place seemed to produce a number of unfair tax breaks for the fast food giant.
"Tiny states in the Bloc try to get these big companies to come by offering them big breaks on taxes", Joe Garza of law firm Garza & Harris sheds some insight on the subject. "The intent is to bring jobs and money into the country."
McDonald's already fought a potential order to pay $500 million in back taxes, saying that they've paid an appropriate amount of taxes already, making it look like the EU's claims are unfounded. However, it was found that the famous fast food chain had earned $1.8 billion in profits since 2009, but only paid an average tax rate of 1.49 percent. These so-called "sweetheart deals" are popping up more and more as the EU continues its investigation in the small country.
"They're (McDonald's) just one of many companies that moved their primary tax residence to the UK", Garza continued. "It was in 2012 that Britain really relaxed their stance on their taxation of companies' foreign subsidiaries. They have a corporate tax rate of only 20% and no withholding taxes on dividends."
"Companies registered can play it smart and be altogether exempt from taxes. They can move their profits out of the country and not pay a single cent."
The fast food giant has a different story however, and touched on various reasons why the move to England is beneficial for everyone. A statement by McDonald's said, "We are aligning our corporate structure with the way we do business, which is no longer in geographies, but in segments that group together countries with common market and growth characteristics." Mentioned also was the fact that the UK is working on McDonald's connections to other markets and that "this change has a clear business rationale in matching our corporate structure to our new functional structure."
The promise of 5,000 new jobs is probably the biggest draw for the country's citizens, though it'll be a miracle if they'll get anything close to this number. A spokesperson for Prime Minister Theresa May stated,"We welcome continued investment from companies around the world into the UK, particularly where that's securing growth and increasing jobs." She sounds confident.
No matter what side you're on, the move is happening and it's a big one. Whether it'll pay off for all parties involved, we'll just have to wait and see.
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