WASHINGTON – Americans for Tax Fairness (ATF) released a new report Thursday showing that Burger King’s planned “inversion” will allow the company and its leading shareholders to avoid an estimated $400 million to $1.2 billion in U.S. taxes between 2015 and 2018. This contradicts the assertion by CEO Daniel Schwartz that Burger King’s plan to become a Canadian company “is really not about taxes.”
The report is especially topical because the deal is expected to close Friday, Dec. 12.
The ATF report finds that by renouncing its U.S. corporate “citizenship” Burger King could dodge $117 million in U.S. taxes on profits that it held offshore at the end of 2013. Burger King has been able to indefinitely defer paying taxes on those profits under U.S. law; by becoming a Canadian company it may never pay U.S. taxes on those profits. In addition, Burger King may avoid an additional $275 million in U.S. taxes between 2015 and 2018 because under Canadian law it will no longer have to pay (even on a deferred basis) U.S. taxes on future worldwide profits.
The report also reveals that Burger King’s largest shareholders could save as much as $820 million in capital gains taxes because of the way the company has structured the inversion. The report also estimates that Burger King, as the #1 burger chain serving members of the U.S. Armed Forces, could receive more than $150 million in royalties and marketing support for its military restaurants over the next 15 years.
The report also shows that U.S. taxpayers currently pay an estimated $356 million a year to subsidize Burger King’s low pay and meager benefits, through health insurance, food stamps and wage supports for the working poor. Burger King will continue to enjoy that support even after becoming a Canadian corporation.
“Burger King says it’s inversion is not really about taxes,” said Frank Clemente, executive director of Americans for Tax Fairness. “But the corporation and its shareholders could dodge more than a billion dollars in U.S. taxes over the next few years. It’s not credible to say that a potential tax break of $1 billion didn’t influence its decision to become a Canadian company.”
“Burger King’s decision to renounce its U.S. citizenship and 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,” added Clemente.
Key members of the U.S. Senate have sharply criticized Burger King for attempting to dodge U.S. taxes through its planned corporate inversion. In September, Sens. Dick Durbin (D-IL), Carl Levin (D-MI), Jack Reed (D-RI), Bernie Sanders (D-VT) and Sherrod Brown (D-OH) called on Burger King to reverse its pending decision to become a Canadian company. In a letter to CEO Daniel Schwartz they wrote “We urge you and the Board of Directors to reverse your decision to move the company’s tax address overseas to avoid U.S. taxes.”
The report released today by Americans for Tax Fairness on the eve of the closing of the Burger King inversion shows that by becoming a Canadian company it will dodge far more in U.S. taxes than had been previously realized.
OTHER RECENT ATF REPORTS
Americans for Tax Fairness is a diverse coalition of 425 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.