French police search McKinsey's Paris office in tax fraud probe

Police on Tuesday searched the Paris office of US management consultancy McKinsey as part of an investigation into suspected tax fraud, the financial prosecutor's office said.

Police officers leave the building hosting McKinsey & Company France on 24 May in Paris after searching the headquarters as part of investigation into suspected tax fraud. AP - Michel Spingler

The investigation into the U.S. management consultancy was triggered after the French Senate in March alleged that the firm was not paying corporate taxes in France.

McKinsey denies any wrongdoing.

"The company cooperates fully with public authorities, as it has always done," McKinsey said in a statement, in which it confirmed Tuesday's raid.

"McKinsey reaffirms that it complies with the French tax and social rules applicable to it."

Senate report

A report by the French Senate in March said French ministries more than doubled spending on outside consultants from 379 million euros in 2018 to 894 million euros last year.

The report also said that McKinsey, which has been present in France since 1964 and has its office on Paris' prestigious Champs-Elysees, had not paid corporate taxes in France over the last ten years.

Rather it used a system of “tax optimisation” through its Delaware-based parent company. 

The tiny state of Delaware is renowned for being an on-shore tax haven in the US.

McKinsey at the time referred to its statement that said its French arm had paid out 422 million euros in taxes and social charges from 2011 to 2020.

McKinsey affair

The use of private consultants by President Emmanuel Macron's government emerged as an unexpected issue ahead of the presidential election in France in April which Macron won.

The opposition had accused Macron's government of spending too much on international consultancies that pay little or no tax in France.

In early April, on hearing the probe had been launched, Emmanuel Macron told French television he was “shocked” by the accusations of tax evasion.

According to an investigation by online news outlet Mediapart Macron had close personal ties to McKinsey, claiming the US consultancy had worked for Macron for free when he was economy minister in 2014.

The search of McKinsey's Paris office comes less than three weeks before parliamentary elections in France in which Macron is seeking a majority to be able to carry out reforms in his second term.

He faces opposition notably from a left-wing coalition (NUPES), members of which have sought to paint him as "president of the rich".

(with Reuters)