Burger King Worldwide Inc. and Canada-based doughnut chain Tim Horton’s are working on a deal that would cause Burger King to relocate its base of operations out of the country in what’s called a “tax inversion” deal, reported The Wall Street Journal. When the deal is completed, Burger King, whose profits mostly come from America, will be exempt from paying American corporate taxes.
According to the WSJ, “inversion deals enable companies to save money on foreign earnings and cash stowed abroad, and in some cases lower their overall corporate rate.” Because of its proximity and lowered corporate tax rate, 15 percent, American companies have been more drawn to Canada in recent years. Tim Horton’s market value is approximately $8.4 billion, and Burger King’s is approximately $9.6 billion, equaling $18 billion.
In the deal, the companies wouldn’t even fully merge. Tim Horton’s and Burger King would still function largely as separate, autonomous entities, but would share corporate services, stated The Huffington Post.
Inversion deals have become a popular trend with American companies, namely American medical companies. AbbVie Inc., a Chicago-based medical company, made an inversion deal with Irish company Shire PLC, cutting AbbVie’s corporate tax rate almost in half from 22 percent to 13 percent. Medtronic Inc. also conducted the same deal with Covidien PLC, another Ireland-based company, to shirk paying U.S. corporate taxes.
The White House is now putting together a list of options designed to deter American companies from engaging is such deals that would ultimately shift the tax burden further on poor people and the shrinking middle class. However, it’s hard to think that Burger King will succumb to a list assembled by a weakened executive branch, which is already in the pockets of American corporations and Wall Street.