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Tax inversion: Burger King to buy Tim Horton’s, move headquarters to Canada

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The end result of the announced purchase of Canada’s largest chain of bakeries, Tim Horton’s, would create the world’s third largest fast food chain with annual sales exceeding $30 billion. This brought immediate cries of another tax inversion as the combined company would be headquartered in Ontario, Canada. Forbes, Christian Science Monitor and others pontificated on yesterday’s editorial pages about the tremendous tax incentive for companies to relocate to other countries in order to shift tax expenses to the profit line.

“Canada’s corporate tax rate in Ontario of 26.5% is considerably favorable to the American corporate tax rate of 35% thanks in large part to the conservative Canadian government led by Stephen Harper,” said Jon Hatley of Forbes. “When comparing developed countries to what companies pay in the U.S.; Canada came in at 53.6%, the U.K. came in at 66.6%, and the Netherlands at 74.5% of the U.S. corporate tax burden.”

But CS Monitor’s Bryan Cronan wrote yesterday the gap is even bigger noting the Florida-based Burger King could pay up to 39.6% in corporate taxes. “Corporate executives have a fiduciary duty to their shareholders, and a lower tax rate can boost corporate profits.”

The United States has the largest corporate tax rate according to CNN Money. They point out that critics feel it makes USA based companies less competitive in the world marketplace.

Michigan has also lost tax dollars as Perrigo PLC moved its tax base from Allegan on the state’s western Lower Peninsula to Ireland, where the corporate tax rate is only 12.5%. Delphi Automotive of Troy also moved its tax base, choosing the Channel Islands as their new home according to Fortune’s list of S&P companies that have reincorporated to allegedly avoid taxes.

Tax inversion can be a marketing nightmare. Walgreens found that out when they floated the possibility of moving their headquarters. Following the announcement boycott threats began to surface ultimately convincing the chain not to go through with the move.

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