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British tax hike forces McDonald's to Geneva

Get it to go: McDonald's is moving its European headquarters in London to Geneva Keystone

McDonald's is to relocate its European headquarters from London to Geneva before a rise in British taxes starts to bite, according to newspaper reports.

This content was published on July 13, 2009 - 14:49

The American burger giant is the most prominent in a line of companies to move away from London after Britain announced it would introduce more stringent taxes for profits earned on intellectual property rights abroad.

Earlier this year, international publishing group Informa, relocated to Geneva to take advantage of favourable tax conditions and Switzerland's growing stature as a centre for intellectual property management.

Intellectual property is becoming a more important factor for company profits each year, according to corporate tax expert Thierry Boitelle from Swiss law firm Altenburger. McDonald's, for example, earns a large slice of its revenues from the royalties of restaurant franchises based around the world.

"These are intangible assets that are easier to relocate than factories," he told swissinfo.ch. "These are increasingly high-value assets that do not require a large workforce to manage. Many companies are looking to switch to areas with the best tax benefits."

Centre of expertise

McDonald's denied that the move was motivated by tax. Instead, the company said relocating "enables us to conduct the strategic management of key international intellectual-property rights, including the licensing of those rights to our franchisees in Europe, from Switzerland".

In fact, countries such as Luxembourg and Belgium offer better tax rates on intellectual-property (IP) profits than Switzerland, according to Boitelle.

However, Swiss laws protecting company IP are among the most stringent in the world and expertise is readily on hand in Geneva as home to the World Intellectual Property Organization (WIPO).

"We have a lot of experts here and there is a real competence in Geneva for IP management. There is not only a fiscal motivation for companies to relocate here but also an operational motivation," Stéphane Graber from Geneva's department of economic affairs told swissinfo.ch.

Watertight IP laws, protecting brands and inventions, are particularly strong in Switzerland thanks to the country's strong tradition of innovative biotech enterprises. IP protection regularly scores high marks in global comparison business environment surveys, conducted by the likes of the World Economic Forum.

Growth area

Boitelle told swissinfo.ch that his company has had enquiries from other fast food restaurant chains looking to benefit from this feature and the proliferation of universities and other centres of research and development.

"I could see more examples of restaurant, pharmaceutical and biotech companies coming to Switzerland," he said. "There is also a lot of hotel brand management done here."

Boitelle believes Switzerland has the potential to become a world leader in the growing service sector of IP management just as it has carved a strong niche in wealth management.

"With a little help from the authorities, Switzerland could spearhead this growing industry," he said. "We are not quite there yet, because other countries offer better tax rates, but it is something Switzerland should focus on."

Matthew Allen, swissinfo.ch

Key facts

1976: First McDonald's in Switzerland opens in Geneva
1993: First McDonald's in canton Ticino opens
146: Total number of McDonald's in Switzerland today
6,800: Total number of employees in Switzerland
SFr630.5 million: Sales in 2008
82%: amount of Swiss ingredients purchased yearly

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