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EU launches probe into McDonald’s Luxembourg tax deals

The European Union launched a probe Thursday into US fast food giant McDonald’s tax deals with Luxembourg, widening an investigation into alleged tax dodging by major multinationals that includes Amazon and Apple.

The European Commission, the EU’s competition regulator, “has opened a formal probe into Luxembourg’s tax treatment of McDonald’s,” a statement said.

“Its preliminary view is that a tax ruling granted by Luxembourg may have granted McDonald’s an advantageous tax treatment in breach of EU State aid rules,” it added.

The case against one of the world’s most iconic companies adds to a series of probes launched last year following the LuxLeaks affair, which revealed that top global companies had negotiated lower tax rates, in some cases as low as one percent, in secret pacts with Luxembourg.

“A tax ruling that agrees to McDonald’s paying no tax on their European royalties either in Luxembourg or in the US has to be looked at very carefully under EU state aid rules,” EU Competition Commissioner Margrethe Vestager said in the statement.

Tax deals between EU member states and companies — known as tax rulings — are not in themselves illegal and the firms involved insist they fully comply with the tax laws where they operate.

But they have run afoul of the European Commission’s tough rules on state aid, which are designed to ensure fair competition for all.

In October, the European Union ordered coffee shop chain Starbucks and Fiat to each repay up to 30 million euros ($34 million) in back taxes.

Brussels said tax deals that the Netherlands offered US coffee giant Starbucks and Luxembourg gave Italian automaker Fiat were illegal, dealing its first major blow to big business in a campaign against sweetheart tax arrangements.

Decisions on Apple in Ireland and Amazon, also in Luxembourg, are also expected early next year.