Analysis
20 February 2024

A French dairy group suspected of tax fraud

Since 2018, Lactalis has been suspected of committing tax fraud and laundering the proceeds of such fraud via schemes involving Luxembourg and Belgian entities. This investigation, launched 6 years ago, based on press revelations and fueled by a tax inquiry conducted by tax authorities, has reached a new procedural stage with these searches carried out at the group’s Paris and Laval premises, as well as at the home of its CEO.

 

On Tuesday 6 February 2024, 6 years after the opening of the investigation by the National Financial Prosecutor’s Office (Parquet National Financier hereinafter “PNF”), the Brigade nationale de répression de la délinquance fiscale (hereafter “BNRDF”) searched the premises of the Lactalis group, located in Laval and Paris, as well as the home of its CEO.[1]

In 2018, following revelations in the press, the PNF has launched a criminal investigation into the French dairy giant.[2]

Lactalis is suspected of having used fraudulent schemes to transfer its profits to companies based in Luxembourg and Belgium, to evade French tax. Supposedly committed over a period extending from 2009 to 2020, the schemes allegedly enabled the dairy group to avoid paying tax on several hundred million euros.[3]

In 2018, Confédération Paysanne (a French agricultural union) also commissioned a financial investigation from a journalist who had already made revelations about Lactalis. The journalist reported that he had discovered profits being channeled to a company incorporated under Luxembourg law.[4]

The journalist responsible for this investigation indicated that he had discovered payments of up to 1.99 billion euros by Lactalis to empty shell companies located in Belgium and Luxembourg, in 2017 alone.[5] According to this journalist, the method used by Lactalis is based on several mechanisms: the creation of fictitious debts, inter-company receivables and inter-subsidiary loans. Schemes were allegedly set up to transfer the debt and receivables of the French subsidiaries to the Belgian holding company. The Group would also have used equity loans between its subsidiaries and a shell company located in Luxembourg. This arrangement allegedly enabled the subsidiaries to reduce their profits by paying interest to the Luxembourg company, thereby drastically reducing their tax liability.[6]

In 2019, Confédération Paysanne reported the existence of a “particularly complex intra-group rebilling system, as well as a fictitious share purchase system” to the PNF, constituting, according to the union, “tax evasion”.[7]

In an article published in 2020, the investigative website Disclose revealed the results of the aforementioned journalistic investigation to the public, estimating that Lactalis had avoided paying French corporate tax for 220 million euros between 2013 and 2018.[8]

In parallel with the criminal investigation, Lactalis’ premises were also subject to searches conducted by tax authorities in 2019, a possibility provided for under article L.16B of the French Tax Procedures Code (hereinafter “LPF”), as part of a tax investigation. In 2022, this tax investigation resulted in the tax authorities having to report the matter to the PNF, pursuant to article L.228 of the LPF[9]. This new procedure, implemented since October 2018[10], requires tax authorities to report to the prosecutor any facts they have examined in the course of their tax investigations, and which have led to the application of the most serious penalties, when amounts involved in the fraud exceed €100,000.

This case is a further illustration of the PNF’s determination to fight against tax fraud: 363 of the 532 convictions resulting from PNF investigations were handed down in criminal tax law cases, while in 2023, offences against public finances accounted for almost half of the total litigation handled by the PNF.[11]

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