It seems every “news” site I read, I see an article about how the evil corporation Burger King is doing something wrong by performing a tax inversion. I’ve read arguments that Burger King is unethical, immoral, and evil.
Burger King is simply operating within the rules and bounds available to it. It is finding the best alternatives to reduce expenditures and reward the shareholders. Burger King could not have found a more willing partner than Tim Hortons. Tim Hortons has tried and failed multiple times to enter the US marketplace. Burger King was desperately seeking a lower tax burden.
The United States of America boasts the worlds highest corporate tax rate at a whopping 39.1%! That is for every $1 BK earns, $.40 goes to the government. This is before salaries, benefits, rent, insurance and cost of the food they served you. So the $3.49 Whopper you purchased earns BK $2.09 before they pay someone to cook it, pay for the cost of the burger, the building, etc… So you really expect a quality burger for pennies? What’s left for BK to return to their investors? Investors who spent their hard earned money to earn more money.
We should applaud BK’s decision to perform a tax inversion, moving their headquarters and tax base to Canada. This will reduce their corporate tax rate from 39% to 26% a 1/3 decrease! Additionally, BK can now “loan” money tax free to it’s US subsidiary.
If you’re upset with BK, you’re really looking in the wrong place. What’s wrong is the system we require corporations to operate under. By enforcing this high tax rate, we are encouraging corporations to move their headquarters out of country. One of my grad school professors said: “The only thing you need to know in life is that people will win.” In this case BK is winning by reducing their tax burden, freeing cash for better service, quality and returns to the investors.