Before I rip Burger King a new one, a moment of full disclosure: I haven't walked into one of those joints in I dunno 25 years. So, maybe it's worth the whatever it costs now to choke down and swallow that stuff. But, know this: every dollar you put into that place now is basically a contribution to yet another tax dodge--theft from the public's right to have a decent society.
You probably read about Burger King's purchase of the Canadian company, Tim Hortons. Well, it's nothing but another tax inversion--that cute little tactic that's all the rage in corporate America. Reincorporate overseas and dodge U.S. taxes.
Citizens for Tax Justice explains:
The merger will allow Burger King to claim for tax purposes that it is owned and controlled by a smaller Canada-based company. We’ve heard this song before — several times in the last three months (Medtronic, Mylan, Walgreen and Pfizer) and 13 so far this year. Corporate bosses and their lobbyists continue to claim that they are doing nothing wrong. Gaping loopholes in the law allow them to do this, and without action from Congress or the administration, there is no incentive for corporations to stop exploiting those loopholes.
And:
But another reason corporations invert is to avoid paying U.S. taxes on profits earned in America in the future, and this is relevant for a company like Walgreen’s (which was considering inversion until recently) or Burger King. This can be accomplished through earnings stripping, a practice that effectively shifts profits earned in the United States to another country where they will be taxed less. So for Burger King, this means it could continue to earn profits off the burgers and fries its sells to Americans yet use accounting tricks to shift those profits to Canada so they will not be subject to U.S. taxes.
Looking past the technical details, the bottom line is this: It’s insulting that the company intends to continue profiting by selling a quintessentially American product to U.S. consumers but then pretend to be Canadian when the time comes to pay taxes.
Burger King is actually owned by a Brazilian private-equity firm, 3G Capital Management. And, surprise, surprise, the deal above shields the company from any capital gains liability, per
The Wall Street Journal(paywall):
The deal is structured in a way that would shield Burger King's shareholders, including 3G Capital, from taxes on capital gains. For shareholders of the acquiring company with capital gains, inversions normally trigger tax payments—without yielding cash from a sale of the shares.
In this case, Burger King investors can choose to receive either common stock in the combined company or units in a newly formed Ontario limited partnership, or a combination of the two. Choosing partnership units would let shareholders defer taxes on their paper gains until they sell the units or convert them into common stock, which they can do a year after any deal closes. A U.S. taxpayer who holds the units until death wouldn't owe any income tax on their appreciation, said Robert Willens, an independent tax analyst based in New York.
The move would blunt the impact of a 1996 Treasury rule that sought to discourage inversions by penalizing shareholders of the U.S. company. The rule—known as the Helen of Troy rule, after a U.S. consumer-goods company whose move to Bermuda sparked it—requires shareholders to book any gains on shares converted into stock in a new company.
This whole tax inversion scam has nothing to do with "competitiveness", as I
wrote recently. And it's very simple to stop this as I wrote
here.
It may be a legal tax maneuver but it's theft from the public: the public pays for all the infrastructure that goes into making profits for Burger King, and all the other corporate scum who pocket profits but choose to run away when it comes to paying a fair share.