EU launches probe into Luxembourg tax scheme for McDonald's

Brussels (dpa) - The European Union launched an investigation Thursday into a tax scheme granted in Luxembourg to fast food giant McDonald‘s, the fourth US multinational to land under Brussels scrutiny for suspected tax-dodging."A tax ruling that agrees to McDonald‘s paying no tax on their European royalties either in Luxembourg or in the United States has to be looked at very carefully under EU state aid rules," EU Competition Commissioner Margrethe Vestager said in a statement.Tax rulings are issued by many countries to provide companies with clarity on how their taxes will be calculated.Taxation is usually a national issue in the 28-country EU, but the European Commission believes it can intervene in these cases because the tax arrangements constitute state aid, an area it regulates.If the tax scheme is found to have violated the bloc‘s strict competition laws, the EU‘s executive could order Luxembourg to recoup the illegal tax advantages from McDonald‘s.The commission has already used this approach against Starbucks, with Netherlands ordered in October to have the US coffee retailer repay 20 million to 30 million euros (21 million to 32 million dollars).In the McDonald‘s case, the commission suspects that derogations from Luxembourg tax law and a US-Luxembourg double taxation agreement may have given the company "an advantage not available to other companies in a comparable factual and legal situation.""The purpose of double taxation treaties between countries is to avoid double taxation - not to justify double non-taxation," Vestager said.McDonald‘s Europe Franchising has "virtually not paid any corporate tax in Luxembourg [or] in the US" since 2009 despite royalty-derived profits that in 2013 amounted to more than 250 million euros, the commission said.A group of trade unions had estimated in February that McDonald‘s has deliberately avoided paying more than 1 billion euros in European corporate taxes.The EU has moved to crack down on corporate tax avoidance in the wake of the so-called LuxLeaks scandal, in which a journalism consortium reported that Luxembourg had helped multinational companies dodge billions of euros in taxes.The commission has also launched investigations into tax regimes granted by Ireland to US technology giant Apple and by Luxembourg to US online retailer Amazon.