Fast-food giant Burger King is living out its slogan “Have it your way,” by taking their business elsewhere in order to avoid crippling corporate taxes.
Just today, Burger King announced that it will buy Tim Hortons Inc. for about $11 billion and will therefore be moving headquarters to Ontario, Canada. Burger King will be lowing its taxes by a substantial percentage.
In the US, the fast-food company currently pays about 40 percent under the corporate tax. In Canada, however, that tax rate will be slashed down to just roughly 26 percent. The US has the highest corporate tax rate in the world at exactly 39.1 percent, followed by Japan with a 37 percent rate. Slovenia and Ireland have the lowest, ranging from 17 and 12.5 percent.
But, Burger King is not the first company to jump ship in order to avoid high corporate taxes.
Burger King would hardly be the first large American corporation to move its headquarters—more than 70 U.S. companies have reincorporated overseas since the early 1980s. The practice has been especially popular lately—more than half of those inversions have come since 2003, or almost double the amount that did in the twenty years prior, according to data from Congressional Research Service (CRS).
The increasing popularity of tax inversions has prompted discussions about how to close–or at the very least thwart–the sort of loopholes that allow tax flight in the first place. President Barack Obama has expressed concerns about the practice and its imminent growth. “We don’t want to see this trend grow,” he said at a news conference earlier this month. And the Treasury Department is already working to assemble a list of ways to help curb the maneuver.
Because of the deal, Burger King is expected to pay $65.50 Canadian ($59.74) in cash for each Tim Hortons share, representing the total value per Tim Hortons share of $94.05 Canadian (US$85.79), based on Burger King’s closing stock price yesterday.