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Has McDonald’s short-changed Aussies and avoided a half-billion dollar tax bill?

Sarah Stowe

Fast food franchise giant McDonald’s has been accused of avoiding a half a billion dollar tax bill in Australia.

A global group of unions has released a report suggesting Australians have been shortchanged by the burger business which has used legal loopholes to reduce its taxable income.

However, a spokesman from McDonald’s said “We have always been committed to paying our fair share of tax in Australia. In fact, over the past five years, McDonald’s has paid in excess of $500m in tax,” SMH reports

According to a case study in the report, Golden Dodges: How McDonald’s Avoids Paying its Fair Share of Tax, between 2009 and 2013 in McDonald’s Australia there was “an unusually high level” of intercompany payments. The authors allege that the five percent royalty from stores is at odds with the “significantly larger” service fees the Australian business pays to a Singapore subsidiary.

“In each of the past five years, McDonald’s Australia has reported nearly twice as much in outgoing service fee payments as would be explained by the royalties the company receives from franchisees plus any royalty paid on behalf of corporate stores”, the authors write.

The report outlines the way McDonald’s uses its franchising model to generate much of its revenue through royalty payments from franchisees rather than through direct operations of stores.

In 2013 the Australian Tax Office investigated McDonald’s and its franchisees in relation to the sale of franchises.

The report authors suggest the alleged tax practices should be of concern to many stakeholders in the franchise network, including franchisees.

“From the perspective of franchisees, tax strategies which siphon profits from McDonald’s operating markets to tax havens may limit the ability of the company to reinvest in its stores and support franchisee success,” the report reads.