Sleight-of-country not just for tax, Burger King protests

Burger King will avoid hundreds of millions of dollars in US taxes if, as planned, it completes its pending buyout of Tim Horton.

Burger King will avoid hundreds of millions of dollars in US taxes if, as planned, it completes its pending buyout of Canadian coffee-and-doughnuts chain Tim Horton’s, a tax activist group says. In one of the most notable of several corporate tax “inversion” deals this year, Florida-based Burger King announced in late August it would buy Tim Horton’s and put the headquarters of the combined company in Canada.

US companies doing inversions – which involve buying a foreign company and assuming its tax nationality to cut overall tax costs – have been blasted as tax dodgers by Democrats and liberal groups. President Barack Obama has criticised a “herd mentality” by companies seeking deals to escape US taxes.

Americans for Tax Fairness, a group often critical of corporations over taxes, says the fast-food chain’s inversion “creates substantial tax avoidance opportunities.” For instance, it says, by placing its headquarters in Canada so it is no longer a US company for tax purposes, Burger King could avoid $US117 million in US taxes by never having to pay corporate income tax on foreign profits it holds offshore. As future foreign profits would no longer be subject to US income taxes, that could save about $US275 million from 2015-18, according to earnings estimates.

Burger King says the analysis is “materially flawed” and the figures do not accurately represent the facts and circumstances. 

“As we’ve said all along, this transaction is driven by growth, not tax rates. Going forward, we do not expect our tax rate to change materially,” it says.

Earlier, Tim Horton’s shareholders approved the deal, with the combined company to be called Restaurant Brands International.