On the eve of the French presidential elections, the side of French President Emmanuel Macron, a candidate for his own re-election, is trying to defuse the controversy over the use of consultants, in particular the consulting firm McKinsey, which was pointed out in mid-March by a Senate report . For the opponents of the president-candidate, this issue is a symbol of his collusion with the business world.
Caught less than two weeks before the presidential elections in the “McKinsey” storm, the French Executive tries to defend itself as best it can. The use of consulting firms is “usual and useful,” two ministers insisted during a long press conference on Wednesday, March 30. However, this was not enough to quell the growing controversy over the firm McKinsey & Company, highlighted by a Senate report denouncing a “tentacular phenomenon.”
The text, presented on March 16 by the Senate investigation commission, reports the “dependence” of the current Government on the consultants and the tax optimization practiced by the US company. Thus, the consulting expenses of the ministries have risen from 379.1 million euros in 2018 to 893.9 million in 2021.
“The fiasco of McKinsey’s mission on the future of the teaching profession”, “the distribution of contracts during the health crisis” or the use of the McKinsey firm despite doubts about its fiscal situation are some examples of “opacity” that reinforces the “climate of distrust”, lamented the senators of the investigation commission in a statement.
France 24 reviews this controversy, which some are already calling “McKinseygate” and which comes at the worst time for Emmanuel Macron.
- An article in Politico set off the alarms
On January 4, 2021, the news site Politico published an article titled “Slow deployment of coronavirus vaccination poses risks for Macron”. The article claims that some aspects of the vaccination strategy implemented by the government of Prime Minister Jean Castex were entrusted to consulting firms, including McKinsey. Other companies such as Accenture, Citwell and JLL were also mentioned. The newspapers Le Canard enchaîné and media part they also made revelations.
- Why go to McKinsey?
The American consultancy, nicknamed “The Firm”, is present in some sixty countries. In France, its offices are located in the capital Paris and in the city of Lyon. McKinsey offers advice and recommendations to private and public agents on various topics. The Castex government would have used this advice excessively, as pointed out by the senate report published on March 17. “The use of consultants has now become something natural,” says the document, since these companies are, according to the senators, “at the center of public policy.” In total, only for the year 2021, the consulting expenses by the ministries reached 893.9 million euros.
Social benefits, Covid-19… What reforms are they about? Specifically, the Government turned to McKinsey for the reform of the calculation method for housing assistance (3.8 million euros), the management of the Covid-19 vaccination campaign (12.3 million euros) or the organization of an international seminar commissioned by the Ministry of National Education (496,800 euros), which was finally canceled due to the pandemic.
The controversial pension reform was also discussed. A report had been prepared to prepare it for €950,000 before it was finally postponed.
- Why is McKinsey criticized?
In addition to the relevance and usefulness of these contracts, strongly contested by the opposition since the publication of the report, the group’s taxation is the one that was strongly criticized, with senators calling it a “caricature example of tax optimization.”
Although McKinsey is subject to corporate tax in France, “its payments have been zero euros for at least ten years” (between 2011 and 2020), the report says. However, “it employs around 600 people and its turnover in the European country reached 329 million euros in 2020, of which around 5% will correspond to the public sector.”
In an article published on Wednesday, the newspaper Le Canard enchaîné adds that the “extremely high fees that McKinsey France pays to the parent company” should have alerted the General Directorate of Public Finances (DGFiP). Also known as “transfer prices” (prices of transactions between companies of the same group, but resident in different countries), these rates are, “in principle, strictly controlled by the DGFiP”.
“McKinsey uses a very popular tax optimization mechanism among many multinationals: the declaration of the “transfer prices” of its entities in France to the parent company based in Delaware, a tax haven”, complaint Oxfam France. For the NGO, “the company ensures that many expenses, such as those of general administration or the provision of personnel, appear as expenses in the company’s accounting and allow it to reduce its corporate income tax to zero.
According to the investigation of the newspaper Le MondeMcKinsey pays a symbolic flat-rate tax of just $175 a year.
- How does McKinsey defend itself?
Faced with the scandal, McKinsey claimed that it complied with “all applicable French tax and social security regulations” and said that it had paid corporation tax “in the years in which the company made profits in France.” This is what the head of a French subsidiary said in an affidavit last January, and which is mentioned in the Senate report.
On Friday, March 25, the Senate announced that it had remanded the matter to the courts for “suspected perjury.”
- What relationship does he have with Emmanuel Macron?
The links between the current head of state and the consultancy are pointed out in the Le Monde investigation.
Several advisers or former advisers to the firm who had voluntarily participated in the campaign of the candidate Macron in 2017 have later integrated positions within their governments, according to the newspaper.
- How does Macron’s side defend itself?
Macron went on the offensive on Sunday to quell any controversy. The candidate president reaffirmed that resorting to consultants existed under the mandates of former presidents Nicolas Sarkozy and François Hollande, and that it falls within the strict framework of the legal procedure of the tenders.
“There is no contract that is approved in the Republic without respecting the rules of public procurement: bidding, transparency, responsibility of those who sign…”, he said on Sunday, March 27, on the France 3 television channel. “There is the impression that there are tricks, which is false. There are public procurement rules. France is a country of law,” he insisted. That the ministries, which are “working day and night”, rely on “service providers” to help them, “does not shock me”.
Fearing that public powers depend on certain consultants, the Minister of Transformation and Public Function, Amélie de Montchalin, recalled on Wednesday at a press conference that “no consultant has decided on any reform and the decision always corresponds to the State.”
“We have not abdicated our responsibilities,” he said, adding that the practice is “widespread,” “usual” and “useful” in “most cases.”
McKinsey represents 5% of the State’s strategic consulting expenses, according to the Minister of Public Accounts, Olivier Dussopt. And the government, in turn, accounts for 5% of McKinsey’s turnover, he added.
“McKinsey’s tax position is protected by tax secrecy, our services have started an audit at the end of 2021,” he said, declining to comment on the outcome or possible consequences of this audit. “There is nothing that cover”.
- Is it necessary to review the use of consulting companies?
Nothing to hide, but adjustments have to be made, admits Amélie de Montchalin. Although “the State is perfectly willing to resort to consulting companies in certain circumstances”, the minister admitted that improvements are necessary.
Montchalin wants to “rearm the State to strengthen its internal powers” and plans to “reduce the use of external consulting services by at least 15%” from 2022.
This article was translated from its original French
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