EU close to decision on McDonald's tax break probe

A European Union probe into Oak Brook-based McDonald's Corp. is entering its final stages after officials gathered information on whether the fast food chain unfairly benefited from a hefty tax break in Luxembourg, according to people familiar with the case.

The European Commission may be moving ahead with a decision in the McDonald's case before the EU's summer break in August, according to the people, who asked not to be named because details of state-aid investigations are confidential. That means the ruling could arrive before another pending decision on Amazon.com Inc.'s tax deals with Luxembourg, the people said.

EU Competition Commissioner Margrethe Vestager has been cracking down on tax loopholes, ordering Apple in August to pay as much as 13 billion euros ($13.9 billion) plus interest in back taxes over an illegal accord with Ireland. Shortly after, she warned that Amazon and McDonald's were next "in the pipeline." At stake are billions that multinational companies have squirreled away in tax havens, out of the reach of authorities in the countries where they make most of their sales.

Partly in response to the EU probe, McDonald's announced in December it will ditch Luxembourg and switch its non-U.S. tax base to the U.K., where it would create a new international holding company in charge of most of the royalties received from licensing intellectual property rights outside the U.S.

Alongside the EU case, the hamburger giant has been facing criticism from trade unions and consumer groups, alleging the company avoided more than 1 billion euros in taxes in Europe between 2009 and 2013. An EU official last year called the McDonald's case very instructive in showing how far some companies push authorities to avoid paying any taxes.

The Brussels-based commission opened its probe into McDonald's more than a year after starting an in-depth investigation of Amazon's tax affairs. Other cases opened around the same time as Amazon have led to decisions in which Starbucks and a Fiat Chrysler Automobiles unit were ordered to each pay as much as 30 million euros in back taxes to the Netherlands and Luxembourg respectively. Court appeals in all cases are already pending, including ones by Ireland and Apple over their EU state-aid decision.

McDonald's and the EU didn't respond to requests for comment. Amazon declined to comment.

The investigations have been creating tensions in EU-U.S. relations, with then U.S. Treasury Secretary Jack Lew writing to Commission President Jean-Claude Juncker last year about the "disturbing international tax precedents" that the EU probes are creating.

Last week at an event in Paris, a former senior U.S. Treasury official continued the criticism of the EU for putting antitrust lawyers in charge of delving into "very, very tricky" issues that have troubled tax experts for years, such as profit attribution in the Apple case.

"The commission has got itself now in a position where it's a bunch of plumbers doing electrical work," Robert Stack, the Treasury's deputy assistant secretary for international tax affairs under the previous administration, said March 27. "The commission has probably bitten off more than it can chew."

Gert-Jan Koopman, the commission official in charge of the state-aid probes, took Stack's remarks in stride. He said the goal of the EU's state-aid enforcement is to avoid subsidy races, whatever the industry. He then hit back with a Shakespeare reference.

"There is something rotten in the land of tax if these matters are considered to be just a matter of technical interpretation," Koopman said at the Paris event. "It is very hard to understand how it is possible that a company operates in Europe and in effect pays hardly any tax whatsoever."

Further tax cases are planned as regulators sift through new information and the EU is merely at "cruising altitude," he said at a separate event in Berlin on Friday.