Burger King to save millions in U.S. taxes in 'inversion' -study

Thu Dec 11, 2014 12:01am EST
 
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By Kevin Drawbaugh

WASHINGTON Dec 11 (Reuters) - Fast food chain Burger King will avoid hundreds of millions of dollars in U.S. taxes if, as planned, it completes its pending buyout of Canadian coffee-and-doughnuts chain Tim Hortons, a tax activist group said on Thursday.

In one of the most notable of several corporate tax "inversion" deals this year, Florida-based Burger King announced in late August it would buy Tim Hortons and put the headquarters of the combined company in Canada.

U.S. companies doing inversions - which involve buying a foreign company and assuming its tax nationality to cut overall tax costs - have been blasted as tax dodgers by Democrats and liberal groups. President Barack Obama has criticized a "herd mentality" by companies seeking deals to escape U.S. taxes.

In a report that Burger King described as "flawed," Americans for Tax Fairness, a group often critical of corporations over taxes, said the fast-food chain's inversion "creates substantial tax avoidance opportunities."

For instance, it said, by placing its headquarters in Canada so it is no longer a U.S. company for tax purposes, Burger King could avoid $117 million in U.S. taxes by never having to pay corporate income tax on foreign profits it holds offshore.

The group said Burger King's future foreign profits would no longer be subject to U.S. income taxes. That could save the company about $275 million from 2015 to 2018, based on a range of Wall Street earnings projections, it said.

Burger King said in a statement: "The analysis in the report is materially flawed and the figures do not accurately represent our facts and circumstances. As we've said all along, this transaction is driven by growth, not tax rates. Going forward, we do not expect our tax rate to change materially."

A company spokesman declined to respond point-by-point to the report. The spokesman said the Burger King-Tim Hortons transaction will be completed on Friday.

Tim Hortons said on Tuesday its shareholders approved the deal, with the combined company to be called Restaurant Brands International. The company did not immediately respond to a request for comment on the report.

The report said Burger King is a top food supplier to the U.S. armed forces and its "decision to become a Canadian company will mean that while U.S. military families support Burger King by buying its food, Burger King will no longer support service members by paying its fair share of taxes." (Additional reporting by Solarina Ho in Toronto; Editing by Will Dunham and Cynthia Osterman)