The Chain Gang

Burger King’s Canadian Tax Inversion Could Save It $1.2 Billion

Whoppers indeed.
Whoppers indeed. Photo: Burger King; Tim Hortons

The titanic Burger King and Tim Horton’s, which becomes official tomorrow, may have vowed to keep their doughnuts and burgers separate, but plenty of people are still concerned that things will shift to the Canadian side, tax-wise. Burger King has said day-to-day operations will remain headquartered in Miami, but its corporate citizenship is going to transfer to Canada, a move better known as a tax inversion.

To hear them tell it, this amounts to a one percent rate cut at best — 26 percent instead of 27. However, according to a new report from Americans for Tax Fairness, a group that has positioned itself as a corporate taxpayer watchdog, that’s likely a massive underestimate. The border hop, it contends, could save the company and its shareholders $1.2 billion by 2018. It says profits held offshore at the end of 2013 may slip by tax-free (for $117 million in savings), as could future earnings through 2018 (another $275 million). Shareholders, meanwhile, are the real winners by ATF’s calculations. By not paying capital gains taxes, they stand to pocket $820 million.

Burger King of course refutes this, noting without much elaboration, “The analysis in the report is materially flawed and the figures do not accurately represent our facts and circumstances.” It says the move is driven by growth, not tax rates, although its rate, critics point out, is already unnaturally low. The other chain often in the news for allegedly dodging taxes, Starbucks, is still based in Seattle and pays an effective rate of almost 33 percent.

Related: Burger King Will Pay $11.4 Billion for Tim Hortons
[ATF report, Herald]

Burger King’s Canadian Tax Inversion Could Save It $1.2 Billion