Federal Prosecutors in Brazil Open Investigation Into McDonald’s and its Master Franchisee Arcos Dorados Holdings

Federal Prosecutors in Brazil Open Investigation Into McDonald’s and its Master

On Thursday, Marcos José Gomes Correa, a federal prosecutor opened a criminal investigation looking into "fiscal and economic crimes" which McDonald's and Arcos Dorados Holdings, its Latin American master franchise owner might have been engaged in. The prosecutor says that, they along with some related entities may have failed to fulfill Brazil's tax and other laws. There might have been additional violations of the country's franchise laws too.

The likely tax law violations which are being investigated include allegations made by Brazilian labor unions that Arcos Dorados Holdings paid bribes to government officials to get favors from the tax collection regulators in Brazil. The probe into the matter will look into whether the accusations are valid and if the company really paid bribes to officials in 2002, which led to the enactment of a new regulation helping the company reduce the taxes it was required to pay.

As Arcos was not notified officially about the probe earlier, it declined to comment on the questions put across by McDonald's.

Last year, in a petition the labor unions accused Arcos for structuring its operations in a way that will cut down its taxes and also ruling its own franchisees with utter strictness and also for gaining unjust advantages through its real estate practices.

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