Burger King Flees US Taxes by Moving to Canada
Daniel Greenfield, a Shillman Journalism Fellow at the Freedom Center, is a New York writer focusing on radical Islam. He is completing a book on the international challenges America faces in the 21st century.
Under Obama, the United States is turning into California and plenty of American companies are doing what California companies have been doing.
Burger King may be the home of the Whopper, but Canada may be the new home of Burger King.
If completed, the deal would mean Burger King’s corporate headquarters would move to Canada, raising the specter of yet another American company switching its national citizenship to lower its tax bill.
Inversions have become increasingly popular, though the practice has come under fire from Washington as the Obama administration and lawmakers have complained that companies that do so are unfairly — though legally — cutting their tax bills. The practice gained new prominence when Pfizer, one of the biggest names in corporate America, pursued a takeover of AstraZeneca in an effort to find a lower tax rate in Britain.
The American corporate tax rate is about 35 percent, while Canada’s is about 15 percent. But people briefed on the deal negotiations said that the main driver in the talks was not taxes. Burger King already pays a tax rate of roughly 27 percent, and would shave off only a couple of percentage points by moving to Canada, according to the people briefed on the matter.
Even in taxes were the issue (and a few percentage points for an $18 billion company still amounts to a sizable sum. A very sizable sum.) Burger King won’t announce it out loud. Why irritate American consumers or Washington.
No company likes to look greedy, but the idea that such a move will have nothing to do with the tax advantages is simply denial.
One potential reason for the move may be to placate Canadian authorities. Deals in the country are governed by the Investment Canada Act, which allows the national government to block a merger if it is deemed to not be in the best interests of the country.
This is why I’m a protectionist. Every other country is. It’s not like there’s some imaginary open environment out there. China and Japan cleaned out clock largely thanks to protectionism. But protectionism doesn’t work if you don’t have an attractive business environment.
The White House called on Congress to take steps to prevent companies from pursuing inversions. The Treasury Department recently said it is assembling a list of options to deter or prevent the deals for Secretary Jacob Lew to consider.
They can do that in the hopes of making the current economic disaster look a little better, but building an iron curtain around America isn’t the answer to anything. There will always be ways around it and it creates disincentives for new businesses.
Instead of competing for their business, we’ll be warning the companies that we still have left not to leave. That’s exactly the kind of scenario likely to move companies faster out the door.