Since 2010, Burger King Has Reduced Its World Wide Tax Rate by 60%

American taxpayers are being robbed by yet another giant corporation that is deserting the USA after using the country’s advantages to build untold wealth.

Burger King’s recent decision to pursue a corporate inversion to Canada is the culmination of years of maneuvering to dodge paying its fair share in corporate taxes.

In fact, Burger King was able to cut its average worldwide effective tax rate by more than 60 percent over the past few years likely through complex accounting maneuvers.

How did Burger King accomplish such a substantial tax cut? The first key point to know is that Burger King only owns a small percentage of its thousands of restaurants worldwide, with the overwhelming majority of its restaurants owned by franchisees who pay the central corporation for use of its intellectual property.

From the beginning of 2010, when private equity firm 3G Capital purchased the company, through the end of 2013, Burger King went from owning about 12 percent of its worldwide restaurants (1,422), to owning less than half a single percent of its worldwide restaurants (52).

Unlike physical properties such as restaurants, stores or even factories, it’s relatively easy to shift the location of income-generating intellectual property from one jurisdiction to a different low- or no-tax jurisdiction.

This may explain why, after its purchase by 3G Capital, Burger King reorganized its business structure by shedding ownership of nearly all the individual restaurants that it owned.

Because a substantial portion of Burger King’s income is generated through rents and fees that it charges these franchisees for use of its intellectual property, much of its business structure is akin to infamous tax-dodging companies like Apple and Google.

A 2012 investigation by Tom Bergin confirmed that Burger King had been following in Apple and Google’s footsteps by shifting the income it generates across Europe to a low-tax subsidiary (in this case in Switzerland), instead of allowing it to flow back to the United States where its income-generating intellectual property was created in the first place.

While the rest of its international tax structure has not been publicly disclosed, the company does admit to having subsidiaries not only in the infamous tax haven of Switzerland, but also in Singapore, Luxembourg, Hong Kong and the Netherlands.