A lawmaker from France’s ruling Socialist Party has accused McDonald’s of ignoring a tax-reducing pact and pocketing millions. But the hamburger giant has rebuked the MP, saying it is being unfairly singled out.
In 1999, French sheep farmer and activist José Bové won national and international attention for taking the fight to US-based hamburger giant McDonald’s. That year, Bové and his farmer’s union comrades dismantled a McDonald's under construction in the small town of Millau, in southern France, to protest US-imposed tariffs on Roquefort cheese.
That action made Bové a hero of the worldwide anti-globalisation movement that views international corporations like McDonald’s as the enemy of small, locally-owned and run businesses.
But more than a decade later, McDonald’s has a new nemesis in France, even if the escalating row is far less ideological in scope.
Thomas Thévenoud, an MP with the ruling Socialist Party, has blasted McDonald's for allegedly ignoring a pact between restaurants and the French government, and pocketing millions of euros in additional profits since 2009.
Three years ago, the conservative government of ex-president Nicolas Sarkozy struck an agreement with restaurant owners that lowered their value added tax (VAT) from 19.6% to 5.5 % and was meant to boost their business.
In exchange, the eateries – which include high-end restaurants to small bistros to fast-food joints – pledged to lower the price of some items on their menus and invest a significant part of new profits in hiring additional cooks and wait staff.
Nevertheless, Sarkozy reset the restaurant VAT at 7% in January 2012, five months before President François Hollande thwarted his re-election bid in May.
Thévenoud has now penned a damning report to France’s National Assembly on the tax-lowering measure – one that claims restaurants largely failed to hounour their part of the bargain, recommends the agreement be scrapped completely and points a supersized finger at McDonald’s France.
McDonald’s bites back
The Socialist lawmaker, who says he based his report on figures provided to him by McDonald’s, says the fast-food company counted an additional 190 million euros in profits because of the tax cut. He faults the company for re-investing only 136 million of that total in the form of higher workers’ salaries and improvements to work conditions.
An offended McDonald's took out full-page advertisements in the October 30 issue of the country’s most circulated newspapers, including Le Monde daily. It wrote that it has completely respected the VAT pact and that Thévenoud’s numbers don’t add up.
The only number the two agreed on is 190 million in extra profits over the past three years. McDonald’s then subtracts 171 million euros, not 136 million, for its efforts to boost salaries, hire new workers, keep or lower the cost of some food items, and invest in improved and environmentally friendly kitchens.
It boasts having added 3,000 employees to its workforce per year since 2009, and lowered by 5% the price of the Big Mac menu, its flagship product.
The hamburger giant then subtracts another 52 million euros it claims to have lost with the recent VAT rise from 5.5% to 7%. McDonald’s says the bottom line is red, and that its re-investment and slightly higher tax since January actually puts it back by 33 million euros.
A fair critique?
Reacting to McDonald’s full-page rebuttals, Le Monde journalist Samuel Laurent said that it was “hard to believe” the company’s claim that it had lost more than 50 million euros because of the recent tax hike of 2.2%.
In an article that shows little empathy for McDonald’s arguments, Laurent also says it is wrong for the company to take credit for adding 3,000 jobs per year since the VAT was lowered. Pointing to a company report from 2009 – published before the tax cut went into effect and available on McDonald’s own website – he said the company expected to add 3,000 jobs per year anyway, based on normal growth forecasts.
According to economist Henri Sterdyniak, a researcher at the state-funded French Economic Observatory (OFCE), McDonald’s was intentionally misleading people with its figures.
“Unquestionably,McDonald's has earned more with the VAT reduction and lost money with the VAT rise. The problem is that the company is counting all its investments as expenses. At any given time, a company makes investments, hires staff, buys new equipment,” Sterdyniak said.
“There is absolutely no way to distinguish what investments would have been made anyway and which are a result of the three-year VAT reduction,” he added. “Restaurants as a whole made over 5 billion in profits because of the VAT reduction, so McDonald’s claims it has lost money are completely stupid.”
However, the economist agreed that the American fast-food restaurant was being unfairly picked on by the lawmaker Thévenoud.
“All the restaurants benefited from the measure,” Sterdyniak said. “It seems more shocking to me when it concerns luxury hotels and restaurants than McDonald’s.”
Thévenoud also seemed unimpressed with McDonald’s counter-attack. “I would like to find out how much it cost them to take out those full-page adds,” he told the Sipa news agency.
Date created : 2012-11-01