Architects of Burger King’s inversion claim it’s not about taxes
Burger King is rolling ahead with its plan to move to Canada. It confirmed Tuesday that it will purchase Tim Hortons, a Canadian coffee and doughnut chain, for about $11 billion, one of the biggest foreign acquisitions since 2012.
This makes Burger King one in a string of corporate deserters in recent years. According to new data provided by the Congressional Research Service, 47 companies have inverted in the last decade, including at least seven this year alone. These companies are able to dodge US taxes by moving their headquarters, but not their operations, to countries with lower corporate tax rates. So called “inversions” may save the companies a few bucks, but they could cost the US taxpayer tens of billions of dollars.
The Deal: Founded in Miami in 1954, Burger King operates more than 7,000 locations in the United States, but only 300 in Canada. In 1964, the Canadian fast food service Tim Hortons was founded in Ontario and now has more than one store per 10,000 Canadians. Burger King will shell out $11.4 billion for the coffee shop, but both will actually be controlled by 3G Capital, a Brazilian-US investment firm. According to the Wall Street Journal, Alex Behring, who is currently Burger King’s executive chairman and a managing partner at 3G Capital, will head the new company.
Although America has a top corporate tax rate of 35%, numerous multi-national corporations do not pay that much. Instead, U.S. corporations paid an average of 12.6%, according to the Government Accountability Office. Burger King also does not pay the top corporate tax rate, but has a tax rate in “the mid- to high twenties” according to Mr. Behring. While Burger King CEO Daniel Schwartz doesn’t “expect there to be meaningful tax savings,” Canada’s federal corporate tax rate is 15%.
Moving Forward: Burger King should reconsider its own bid for the company. Since the news broke, the public has denounced this newest corporate deserter. #BoycottBurgerKing is now commonplace on Twitter and Burger King’s Facebook was littered with comments threatening to never return. Senator Sherrod Brown added to that chorus: “Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders.”
When Walgreens announced its purchase of Alliance Boots, a European pharmacy, it received similar criticism, and it has since said that it will stay headquartered in the United States. They decided that paying their fair share was more profitable.
BOTTOM LINE: When more and more American companies move out of the U.S., ordinary Americans end up footing the tax bill. Companies employing the process of inversion are taking advantage of U.S. taxpayers and cheating the system, to the detriment of our workers and our economy. It’s beyond unpatriotic and it’s time for them to stop.