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Burger King Says Relocation to Bring Minimal Tax Benefits Draws Doubts

Julia Sun
9/03/14 12:45 PM EDT
Burger King is raising some eyebrows by claiming that by becoming a Canada-based entity, its tax savings will be minimal. Tax professionals in both the U.S. and Canada doubt it. Burger King is known for tax efficiency. When based in the U.S., it maximized profit reporting in jurisdictions with lower tax brackets. As a result, its effective tax rate was only 26% over the past three years, compared to 31% and above at its competitors like McDonald's and Starbucks. Corporate income tax rate is around 26% in Canada, but as efficient as Burger King, it will probably pay less. CEO Daniel Schwartz repeatedly said the deal with Tim Hortons will bring minimal tax savings, but industry experts on both sides of the border are skeptical. One expert says "If they don't see any tax benefits going forward, they are probably not looking very hard." Tax inversion has become a political hot button in the U.S. Lawmakers in Washington are discussing changes in the corporate tax system and how to help businesses who can't afford to create a new headquarters in another country. Investors though, appear to like the idea of the deal with Tim Hortons. Shares of Burger King were up 20% since the deal announcement and nearly 50% year-to-date.
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