Burger King will avoid $117m in tax from Tim Hortons merger, activists say
Findings from Americans for Tax Fairness directly contradict Burger King’s earlier insistence that the merger would create ‘no tax benefit’
Burger King acquires Tim Hortons and calls Obama’s bluff on tax
Burger King stands to avoid paying hundreds of millions of dollars in US taxes if it completes its pending buyout of Canadian coffee-and-doughnuts chain Tim Hortons, according to a group of tax activists.
The findings directly contradict Burger King’s earlier insistence that the merger would create “no tax benefit”. Burger King disputes the conclusions.
Americans for Tax Fairness, a group often critical of corporations over taxes, said the fast-food chain’s proposed merger with Tim Hortons “creates substantial tax avoidance opportunities” because the combined headquarters will be in Canada.
The deal, one of several corporate tax “inversion” deals this year, drew the ire of the White House, which labeled such arrangements as unpatriotic. In an inversion, a US company buys a foreign rival in a country where taxes are lower, and moves its combined headquarters overseas.
Americans for Tax Fairness estimated that Burger King could avoid $117m in US taxes by never having to pay corporate income tax on foreign profits it holds offshore.
The group also said Burger King’s future foreign profits would no longer be subject to US income taxes. That could save the company about $275m from 2015 to 2018, based on a range of Wall Street earnings projections, it said.
Burger King said in a statement: “The analysis in the report is materially flawed and the figures do not accurately represent our 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.”
U.S. 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 Obama has criticized a “herd mentality” by companies seeking deals to escape US taxes.
A company spokesman declined to respond point-by-point to the report. The spokesman said the Burger King-Tim Hortons transaction will be completed on Friday.
Tim Hortons said on Tuesday its shareholders approved the deal, with the combined company to be called Restaurant Brands International. The company did not immediately respond to a request for comment on the report.
The report said Burger King is a top food supplier to the US armed forces and its “decision to become a Canadian company will mean that while US military families support Burger King by buying its food, Burger King will no longer support service members by paying its fair share of taxes.”
