French prosecutor opens tax fraud probe after upper house report on consultancies

PARIS (Reuters) -French prosecutors said on Wednesday they had opened a preliminary investigation into possible money laundering and tax fraud linked to the role of private consultancy firms in the nation’s politics.

The inquiry by the national financial prosecution office (PNF) follows a report by the Senate, parliament’s upper house, on the growing use of private consultancies by the government.

The use of private consultants by the government of President Emmanuel Macron, who has lost momentum in opinion polls ahead of the first round of presidential elections on Sunday, has emerged as a surprise issue in the campaign.

Rivals accuse Macron’s administration of lavishly spending taxpayers’ money on international firms that pay little or no taxes in France.

According to a Senate report last month, ministries have more than doubled spending on outside consultants from 379 million euros ($417 million) in 2018 to 894 million euros last year.

Last week the government said it had “nothing to hide” regarding its use of consultants including U.S.-based McKinsey & Co, which has come under increased scrutiny in the country.

The Senate, which is dominated by the conservatives, has said it is launching legal action against McKinsey, alleging that a company executive gave false testimony when he told senators McKinsey was paying corporate taxes in France.

The PNF on Wednesday did not specify which firms were the target of the preliminary investigation.

McKinsey did not immediately respond to a request for comment on Wednesday.

The firm has previously said its French arm paid 422 million euros ($465 million) in taxes and social charges from 2011 to 2020, without specifying whether that included corporate levies.

(Reporting by Dominique Vidalon, Sudip Kar-Gupta and Tassilo Hummel, editing by Mark Heinrich)