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Fast Food Companies Like Subway, McDonald’s and Starbucks Are Gaming the System to Avoid Millions in Taxes

Each year taxpayers get stuck paying hundreds of dollars more because of corporate tax avoidance.
 
 
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Fast food companies are not only detrimental to your personal health--they’re also detrimental to the economic health of the U.S.

Restaurants like Subway, McDonald’s and Starbucks avoid millions in taxes each year by claiming that their products are intellectual property.

As Think Progress’ Travis Waldron explains, franchises pay money to companies to sell their product and use their logo. But, as Waldron writes, “instead of collecting the fees in the United States, where the intellectual property filings were created, Burger King, McDonalds, and other chains often house the fees in other low-tax countries in order to save millions of dollars.”

For example, take Burger King’s Whopper, as Reuters’ Tom Bergin does. The Whopper was created in the United States. But “the fee the European units pay to use it goes to Burger King's main European office in Zug, Switzerland. There the effective tax rate could range from 2 percent to 12 percent,” writes Bergin.

Subway and McDonald’s operate thousands of stores overseas, but those companies, too, have become good at avoiding U.S. taxes to the tune of millions. There’s nothing illegal about that, given that a loophole in U.S. law allows the companies to operate in that fashion. But it’s still damaging.

As Waldron notes, “in the U.S., corporate tax avoidance cost the average individual taxpayer $434 in 2010, according to the California Public Interest Research Group.”

Bergin explains how Subway avoids taxes as well. "Subway International B.V. reaps around $150 million each year in royalty payments from franchisees in Europe. However, accounts show almost all the income flows to its parent, a partnership registered in the Caribbean island of Curacao which offers tax exemptions on overseas income, according to accountants Deloitte."

 

Alex Kane is AlterNet's New York-based World editor, and an assistant editor for Mondoweiss. Follow him on Twitter @alexbkane.

 
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