US Senators urge ‘unpatriotic’ Burger King to ditch move to Canada
In August, the Whopper-maker announced its plans to buy Tim Hortons, Inc. – a Canadian coffee and donut chain – and move its operations to take advantage of Canada’s lower tax rates. The additional benefit of the Canadian tax system is that companies do not pay extra taxes on income earned abroad.
But this move, a so-called “tax inversion,” is a one of a growing trend among corporations keen to avoid the 35 percent corporate tax rate in the US, and it is facing the ire of Washington lawmakers.
A group led by Democratic Senator Dick Durbin (Ill.), wrote to the company CEO to remind him how the corporation benefits from government largess through taxpayer funding with its use of roads, food safety inspectors, wage supplements through food stamps, and healthcare through Medicaid.
“Now, after profiting from these taxpayer-funded benefits, Burger King intends to move its tax address overseas to avoid paying its fair share for these benefits,” the group said in the letter, viewed by Reuters.
“Many of your loyal customers may choose to spend their hard-earned money at one of your many competitors, instead of supporting a company that wants all the benefits of America but refuses to pay its fair share to support our nation,” lawmakers said, calling the move “unpatriotic.”
The letter was signed by Senate Democrats Jack Reed (R.I.), Sherrod Brown (Ohio), Carl Levin (Mich.) and Independent Bernie Sanders from Vermont.
“Tax Inversion” is the term for incorporating in another country and taking advantage of a lower tax rate, like Ireland’s 12.5 percent, or the UK’s 20 percent rates. Many corporations think the US’ 35 percent tax rate is too high and uncompetitive, and a corporation has a fiduciary responsibility to shareholders requiring them to produce maximum returns.
US household names like Nielsen, Carnival, Michael Kors have adopted inversion, and the pharmaceutical giant, Pfizer, tied to this summer but the deal fell through. Meanwhile, Apple and GE siphon earnings out of the US but they still keep their businesses in the country, according to Fortune.
The Congress Joint Committee on Taxation has estimated that if this trend continues there will be a loss of $19.5 billion over ten years.
A 2004 law said a company can only invert if it is doing business in a significant way in its new country of operation, and if the shareholders of the company to be bought own 20 percent. New suggestions for changing the law are to raise the percentage up to 50 percent, and a Republican-supported Tax Reform Act would impose taxes on money held offshore.