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Burger King and Tim Hortons: Holding company for tax inversion

Tim Hortons
Tim Hortons
Photo by Spencer Platt/Getty Images

Burger King, the fast food restaurant chain headquartered in Miami Florida USA, is in discussions with Tim Hortons, the doughnut – coffee restaurant chain headquartered in Ontario Canada, for purchase. The purchase of Tim Hortons by Burger King would result in a newly created holding company headquartered in Canada.

If the potential purchase becomes reality, 3G Capital investment firm, Burger King’s majority owner, would own the majority of shares of the new company. Such a purchase would not affect the management, workforce, or ability of Burger King to operate in the U.S., and Burger King would be based in Miami with Tim Hortons based in Ontario.

The potential purchase of Tim Hortons by Burger King is seen by many as a move to reduce the tax burden of Burger King. Such a move, known as “tax inversion”, is a way for a U.S. company to reorganize in a country with a lower corporate tax rate by acquiring or merging with a company in another country. Tax inversions allow companies to transfer money earned outside of the U.S. to the parent company in another country without paying additional U.S. taxes.

Tax inversion has become increasingly popular among U.S. companies and also a controversial political issue. Politically, some argue tax inversion is simply a way for U.S. companies to reduce their tax obligation, while others argue it is a matter of maximizing competitiveness.

The purchase of Tim Hortons by Burger King would undoubtedly allow the new holding company to grow faster worldwide while creating a restaurant operator that can offer breakfast, lunch, dinner and snacks as part of its daily menu. The companies would continue to operate as separate brands but would share corporate services. The new holding company would have 18,000 outlets in 100 countries with approximately $22 billion in sales, making it the third largest fast-food restaurant company in the world.

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