Focus: Why McDonald's Tax Practices Matter to the Global Labour Movement

Abstract

8 | International Union Rights | 25/1 FOCUS | TAX AND TRADE UNION RIGHTS Why McDonald’s Tax Practices Matter to the Global Labour Movement In 2009, McDonald’s Corporation – the largest fast food company in the world and the planet’s secondlargest private-sector employer – decided to set up a subsidiary in Luxembourg to handle ‘Intellectual Property’ for all of its European operations. Every McDonald’s store in Europe paid 5 percent of its revenue in exchange for the right to sell Big Macs and every other ‘McProduct’ – which presumably cost a great deal of money to intellectually develop – and these royalties were funnelled to this corporate entity in Luxembourg. So this company in Luxemburg had an annual revenue of roughly $800 million starting in 2009 and about $1 billion each subsequent year until they closed it in 2016. What did they do there with all this money? Develop new products? Perhaps special sauces to help McDonald’s sell more burgers? Apparently not, as the company in Luxemburg was housed in a small, anonymous office complex, and it had a mere thirteen employees spread between its head office in Luxembourg and branches in Switzerland, the UK and in the USA. Seven billion dollars over seven years: not bad revenue for a company of thirteen people! Of course, locating subsidiaries in tax jurisdictions within the EU that have accommodating tax agreements that allow companies to pay essentially no taxes is nothing new. It is a familiar strategy that many multinationals have been using in Europe. The effective rate of taxation in Luxemburg for this McDonald’s subsidiary was 1.7 percent between 2009 and 2015. What is particularly galling about the McDonald’s case is that it is a brick-and-mortar company, not a digital entity that makes money in series of ones and zeroes. It is highly visible to consumers, who understand that the money they are paying for a very tangible product is effectively being funnelled out of the country in which they are eating their burger to executives’ pockets in Illinois, where McDonald’s is headquartered. Unlike consumers’ paycheques, which are carefully and methodically taxed, corporate receipts apparently are subject to a different, more malleable set of rules. Thus one of the major economic actors in Europe is not paying its share for the overstretched nurses, the exhausted fire-fighters, and the labouring sanitation workers who are meant to pick up the many McDonald’s wrappers that litter the high streets of Europe. All this in a period of cutbacks and austerity that are stretching public budgets across Europe and leading to real cuts that affect people in real ways. Why McDonald’s Matters McDonald’s practices in Europe are no exception to its conduct in the rest of the world. On the contrary, virtually everywhere McDonald’s operates it uses its power and influence to avoid its legal obligations. In recent years, McDonald’s has been accused of violating labour and tax laws in Brazil, committing antitrust violations in Asia, and illegally harassing and firing workers in the United States. This pattern of behaviour around the world matters because the company exerts a super-sized impact on the global economy. In addition to being the second-largest private employer, McDonald’s is the world’s largest ‘employer of employers’ – small businesses – with 34,000 franchised stores in more than 120 countries. McDonald’s is the world’s biggest buyer of beef, chicken, lettuce, and tomatoes. And it is the world’s largest food supplier, feeding 69 million people a day. McDonald’s influence is huge, but instead of using its global scale to support good jobs and lift standards in the service sector, it uses its enormous footprint for just the opposite. In recent decades, companies like McDonald’s have faced limited resistance to this way of doing business as corporate power has grown across the globe. But starting in 2012 – a few years after McDonald’s in Europe set up its scheme in Luxembourg – fast-food workers in the US started a revolt that would grow into a global movement to hold the burger giant accountable. The ‘Fight for $15’ On Nov. 29, 2012, some 200...