Auchan, Leroy Merlin and Decathlon can be checked for compliance with tax laws. The inspection of the Ministry of Finance is initiated not by the department itself, but by a State Duma deputy.
The main claim against the three French companies can be formulated as follows: having billions of rubles in revenue in Russia, they pay much less taxes than their competitors. More precisely, they have a tax burden ratio of 0.4%, compared to small and medium retail businesses, whose 3-4% is very small. They also transfer tax obligations to foreign jurisdictions – to France, the Netherlands and Luxembourg. Andrei Lugovoy, First Deputy Chairman of the State Duma Committee on Security and Anti-Corruption, sent an appeal to the Ministry of Finance with a request to check French companies. Here is how he explained his motivation to Business FM:
“I have received information that the Auchan group of companies uses tax optimization schemes in its activities, which may raise questions from the Federal Tax Service. And in order to clarify this situation, I sent requests to the Ministry of Finance with a proposal to conduct a global audit. As far as I understand, the Ministry of Finance approached this issue with understanding and will conduct such an audit. All sorts of letters are written to my e-mail with a cry: “Hands off Auchan! You will not close Auchan! Nobody is going to shut it down.”
Networks of French hypermarkets – grocery, construction and clothing sales – belong to the famous French family of businessmen Mulier. The assets of the semi-closed Mullier Family Association are owned by about 700 of its members, and as many as 1,300 people have the surname of Mullier. The family has dozens of brands, they feed and dress the whole of France. In Russia, they have Auchan, Leroy Merlin and, until recently, Decathlon, which closed hypermarkets and wanted to sell the business. The Kiabi network was also known, it left the Russian market in 2021.
Auchan and Leroy are quite transparent, says Dmitry Chumakov, CEO of Vector Market Research:
“Working in different jurisdictions, such companies sometimes try to find ways to reduce the overall tax burden. Plus, they have the opportunity to redistribute profits and leave it in one country or another. In Russia, in my opinion, there is no bias towards companies. If you look at foreign markets, companies have already faced claims from the tax authorities. On the one hand, it is, of course, a professional participant in the retail market, and at the same time, such a low tax burden is probably the reason why there is an interest in checking how correctly the company really works, whether it is doing everything right.”
Take, for example, Leroy Merlin Vostok and open accounting databases. Revenue for 2019 – 311 billion rubles, for 2020 – 347 billion. The company recorded profit before tax at the level of 11 billion in 2019 and 7.5 billion – in 2020. The revenue became more, and the profit less, maybe this confused the unnamed sources of the deputy, who complained to him about the company. Another argument is that the Mulier family had numerous tax scandals in Europe, searches in the family’s homes in Belgium and Luxembourg, accusations of disguised commercial activities, and so on. However, in the case of Russia, the story does not look promising, says Sergey Matyushenkov, managing partner of the law firm BGMP:
“Regarding tax evasion, it seems to me that the deputy’s letter is more a reason to promote. These companies are the largest taxpayers and are under constant tax monitoring. Let’s just say that it is extremely difficult for her to evade any taxes. Why they have such a small tax burden is hard to say, you have to look. What our tax authorities have done in terms of identifying evasion schemes, especially with VAT, is phenomenal. And what is possible in France is not the fact that it will work with us.”
The Business FM radio station sent inquiries to Auchan and Leroy; no responses were received at the time of publication of the material. The companies themselves have not yet commented on the situation. But most likely they will. The Russian market is important for companies – Auchan and Leroy are popular here. Auchan has 153 hypermarkets in Russia, while Leroy Merlin has 112 stores. And in December, “Auchan” registered a trademark with the speaking name “Native, and that’s it.”
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