Backlash Against Burger King For Tax Inversion Grows

There are some groups that don’t want Burger King to have it their way.

The International Business Times is reporting that a group called the Americans for Tax Fairness (ATF) has created a report claiming that Burger King will save great amounts of money in taxes by utilizing tax inversion. This was, according to the ATF, the main rationale for putting the corporate headquarters for the newly-merged company in Toronto.

The ATF is stating that the move could save Burger King anywhere between $400 million and $1.2 billion between 2015 and 2018.

“Burger King says it’s not really about taxes,” said Frank Clemente, executive director of the ATF, in a publicly released statement. “But… it’s not credible to say that a potential tax break of $1 billion didn’t influence its decision to become a Canadian company.”

Under the new merger, Burger King would move its headquarters from Miami, Florida, and become a subsidiary to the new corporate headquarters for the newly created corporation, the New Red Canada Partnership, which will be kept in Ontario. This follows a recent trend for some American companies to escape a 40-percent American tax barrier, but pay the taxes on the net profits in the new country, usually 25 to 26 percent.

CNN Money is reporting that the ATF is going even further, saying, “”Burger King’s inversion adds up to a ‘whopper’ of a tax dodge.”

Burger King, in a statement, said “[W]e do not expect our tax rate to change materially.”

“The analysis in the report is materially flawed and the figures do not accurately represent our facts and circumstances,” Burger King continued. “As we’ve said all along, this transaction is driven by growth, not tax rates.”

Even though Burger King is committed to paying federal, state, and local taxes, Burger King would no longer have to pay tax on profits made outside the United States, as is part of the inversion issue. Also, according to the ATF, the structure of the deal between Burger King and Tim Hortons saved shareholders at least $800 million in capital gains tax.

Though some of the talk of customer’s boycotts against both Burger King and Tim Hortons have subsided, there is still enough noise to make that a certainty.

As far as the shareholders, 76 percent (or 267.5 million shares) of Burger King shareholders will switch to stock in the new company, trading as Restaurants Brands International. The other 24 percent did not vote to switch, so will get the new stock by default.

Seventy-two percent of Tim Hortons’ shareholders elected to switch, while 26 percent did not vote, and they will get new stock as well. Two percent of Tim Hortons’ shareholders decided to cash out their stock altogether, according to the South Florida Business Journal.

[Image courtesy of local SYR/MGN online]