With the presidential elections approaching, Macron’s camp is trying to clarify the controversy over the use of consulting firms, particularly McKinsey, which was considered abusive, pointed out in mid-March by a Senate report. For opponents of the presidential candidate, the case is the symbol of their collusion with the business community.
Caught up in the “McKinsey” storm, the executive defends himself as best he can, less than two weeks before the presidential elections. The use of consulting firms is “usual and useful,” two ministers hammered out during a long press conference on Wednesday, March 30. Not enough, however, to extinguish the growing controversy over McKinsey & Company, pinned down by a Senate report highlighting a “spreading phenomenon.”
The text, delivered on March 16 by the Senate investigative committee, denounces the “dependence” of the current government on consultants and the tax optimization practiced by the American company. The spending on consultancy by the ministers thus went from 379.1 million euros in 2018 to 893.9 million euros 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 examples of an “opacity” that it reinforces the “climate of mistrust”, regret the senators of the investigation commission in a press release. France 24 returns to this controversy that some are already nicknamed “McKinseygate” and that comes at the worst time for immanuel macroncandidate for re-election.
Politico article sets fire to gunpowder
On January 4, 2021, the Politico site published an article titled “The slow implementation of coronavirus vaccination poses risks for Macron” (“the slow deployment of vaccination against Covid-19, a risk for Macron”). We learn that certain aspects of the vaccine strategy put in place by the Jean Castex government have been entrusted to consulting firms, including the American McKinsey. Others such as Accenture, Citwell and JLL are also cited. The chained duck and media part also make disclosures.
Why use McKinsey?
The American consultancy, nicknamed “La Firme”, is present in about sixty countries. In France, its offices are located in Paris and Lyon. McKinsey provides advice and recommendations to public and private actors on a variety of topics. Advice that the Castex government would have used and abused, as he pointed out senatorial report published on March 17. “The use of consultants is already a reflection”, can be read in the document, these firms being, according to the senators, “at the center of public policies”. In total, for the year 2021 alone, these Ministry advisory expenses reached 893.9 million euros.
APL, Covid-19… What reforms are they about? The Government would have asked McKinsey in particular to reform the method of calculating the APL (3.8 million euros), the management of the vaccination campaign against Covid-19 (12.3 million euros) or even the organization of an international symposium commissioned by National Education (496,800 euros), finally canceled due to the pandemic.
The much criticized pension reform is also affected. A report was prepared with a view to its elaboration for 950,000 euros before its finally postponed.
What do we blame McKinsey for?
In addition to the relevance and usefulness of these contracts, strongly questioned by the opposition since the publication of the report, it is the taxation of the group that stands out, with the senators evoking a “caricatured example of fiscal optimization.”
If the McKinsey firm is subject to corporation tax (IS) in France, “its payments have been zero euros for at least ten years” (between 2011 and 2020), the report notes. However, “its turnover in national territory reached 329 million euros in 2020, of which around 5% in the public sector, and which employs around 600 employees there.”
In an article published on Wednesday, Le Canard enchaîné adds that the “very high royalties that McKinsey France pays to the parent company” should have alerted the General Directorate of Public Finances (DGFiP). Also called “transfer price” (price of transactions carried out between companies of the same group but resident in different States), these royalties are, “in principle, strictly controlled by the DGFiP”. But in the case of McKinsey, neither the “DGFiP advance agreement” nor the “four-page summary document” explains how the company makes its calculations.
“McKinsey uses a tax optimization mechanism popular 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 firm makes sure that many expenses such as general administrative expenses or the provision of personnel appear as expenses in the company’s accounts and allow it to reduce its corporate taxes to ‘zero’”.
According to Le Monde newspaper surveyMcKinsey would thus only pay a symbolic tax package of $175 a year.
How does McKinsey defend itself?
Faced with the scandal, McKinsey said it respected “all applicable French social and tax regulations” and said it had paid corporate tax “in the years the company made profits in France.” This was stated by the manager of a French subsidiary in a hearing held last January under oath -and mentioned in the senatorial report-.
On Friday, March 25, the Senate announced that it had initiated legal action for “suspected false testimony.”
What link with Emmanuel Macron?
They point out the links between the current head of state and the consultant in the world survey.
Several consultants or former consultants to the firm who volunteered for candidate Macron’s campaign in 2017 later held positions within Macronie, according to the newspaper.
How does the Macron camp defend itself?
Emmanuel Macron, candidate for his re-election, went on the offensive this Sunday in order to quell any controversy. In particular, he reaffirmed that the use of consulting firms existed under the mandates of Nicolas Sarkozy and François Hollande, and that it was strictly framed within the legal tender procedure.
“There is no contract that has been signed in the Republic without respecting the rules of public procurement: competition, transparency, responsibility of the person who signs…”, he declared, on Sunday, March 27, on France 3. “We have the impression that there are tricks, that’s not true. There are public procurement rules. France is a country of law”, he insisted. That the ministries, which are “working day and night”, have “suppliers” to help them, “I don’t scandalized”.
Faced with fears of a dependence on the public powers of certain consultants, the Minister of Transformation and Public Function, Amélie de Montchalin, for her part, recalled, during a press conference held this Wednesday, that “no consultant has decided on any reform and the decision is always of the State”.
“We have not divested ourselves of our responsibilities,” he said, adding that the practice is “widespread”, “usual” and “useful” in “most cases”.
The McKinsey firm represents 5% of the State’s spending on strategic consulting, explained the Minister of Public Accounts, Olivier Dussopt. And the government accounts for 5% of McKinsey’s turnover, he added.
“McKinsey’s tax situation is protected by tax secrecy. Our services have carried out a control operation at the end of 2021,” he reiterated, refusing to comment on the result or the possible consequences of this control. “There is nothing to hide.”
Should we review the use of consulting firms?
There is nothing to hide, but adjustments have to be made, acknowledges Amélie de Montchalin. If “the State assumes perfectly to use consulting companies in certain circumstances”, she admits that improvements are necessary, affirms the minister.
The latter wants to “rearm the State to strengthen internal capacities” and plans from 2022 “to reduce the use of external consulting services by at least 15%”.