Brazilian federal prosecutors have launched a probe into one of the country’s largest McDonald’s franchisees to investigate whether the fast food brand has failed to comply with tax laws and other Brazilian franchisee laws, including illegal bribery.
Federal prosecutors contend that Arcos Dorados Holdings may have bribed public officials in return for favors like reducing its tax burden illegally, according to The New York Times.
Marcos Gomes Corrêa, the prosecutor who launched the investigation, has maintained that Arcos is a “frequent infringer” of federal law.
Last summer, labor unions filed a petition maintaining that the franchise operated “with an iron fist” and was unfairly harsh to employees while accepting illegal tax breaks from government officials.
“Subsidiaries in jurisdictions with high tax burdens pay royalties to registered companies that hold intellectual property in tax havens,” the prosecutor’s statement said. “The royalties are treated as tax-deductible expenses in the operating country, reducing the tax burden there. Those same royalties then receive favorable tax treatment in the country they are sent to.”
Both McDonald’s and Arcos Dorados Holdings have deferred press questions at this time.