Burger King has maneuvered to cut U.S. tax bill for years
Burger King may have taken a lot of flack in the past week for a deal that should curb its U.S. tax bill but in many ways it is consistent with the burger chain’s aggressive tax-reduction strategies in recent years.
Some U.S. lawmakers and other critics attacked the company that is the home of the Whopper for deciding to move its tax base to Canada from the U.S.
The Burger King rate is 30 percent lower than the average tax rate it paid in the five years before it was bought in 2010 by private equity group 3G, still the company’s majority shareholder.
The accounting experts say the Canadian move will allow Burger King to double-down on those efforts as it will open up new tax-saving opportunities for the company.
“We don’t expect our tax rate to change materially. As I said this transaction is not really about tax, it’s about growth,” Chief Executive Daniel Schwartz said in a call with analysts last week.
“If the U.S. doesn’t like inversion deals, it should change the law to prevent them. The U.S. has a leaky corporation tax system which encourages companies to park profits offshore,” he said.
Under U.S. tax rules, Burger King cannot currently cut its American tax bill by routing franchise fees from its U.S. franchisees via Switzerland. But these rules would not apply to a Canadian company.
Source: Reuters
