Tax fraud inquiry into consultancy firms launched as French election looms

French financial prosecutors have opened a preliminary investigation into suspected tax fraud by global management consultancy firms, just as Emmanuel Macron’s re-election campaign has been hit by a row over the government’s use of private advisers.

An investigation by the French Senate recently concluded that French public spending on consultants had more than doubled between 2018 and 2021, and reached a record level of €$1bn last year.

The senate, which has a majority on the right, condemned what it called the “sprawling phenomenon” of dozens of private and international firms being hired to advise the government.

Senators singled out the US-based consultancy giant McKinsey, which it said did not pay corporation tax over a 10-year period despite declaring sales of €329m in France.

The senate report alleged that McKinsey used a system of “tax optimisation” through its Delaware-based parent company. McKinsey responded with a statement saying it “respects French tax rules that apply to it” and defended its work in France. The firm said it had paid €422m in taxes and social charges in France.

On Wednesday, France’s national financial prosecutor’s office announced that an investigation had been launched into alleged “money laundering aggravated by tax fraud”. Prosecutors did not name any specific company, but said they would investigate tax practices by management consultancy firms as a whole.

The row over the role of consultancy firms has been dubbed “the McKinsey affair” and has created an unexpected image problem for Macron’s re-election campaign.

It is not illegal for the government to use private consultants, and Macron is not accused of personal wrongdoing. But his political opponents have said taxpayers’ money was spent too lavishly on international consultancies. They said this reflected Macron’s background as a former investment banker, and dubbed him a “president of the rich”.

The radical left candidate Jean-Luc Mélenchon said it was a “scandal” that the state employed private consultants and said he would put an end to such contracts. The far right’s Marine Le Pen said it was “shocking” and “insulting” for taxpayers to see so much of their money spent on consultants.

Macron has responded by saying that France used consultancy firms much less than other countries and that public procurement policies had been strictly followed. He said nothing “murky” had gone on and that it was “totally false” to imply any wrongdoing.

He insisted he had been leading an “international battle” in Europe to get big global firms to pay a minimum tax in the country where they earn profits, and said additional help had been required during the Covid-19 pandemic, when ministries and civil servants had been stretched thin.

Macron enjoyed a boost in the polls last month as voters approved of his handling of the crisis in Ukraine, but he has recently dipped slightly ahead of the first round on 10 April. Meanwhile, far-right Le Pen has risen in the polls and is currently running second behind Macron. She is expected to go through to a final round against him on 24 April.

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