Burger King Looks To Perform Tax Inversion With Tim Hortons Deal
Yet another U.S. company looking to escape the high corporate tax rate
(Fox News) Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc., a deal that would be structured as a so-called tax inversion and move the hamburger seller’s base to Canada.
The two sides are working on a deal that would create a new company, they said in a statement, confirming a report on the talks by The Wall Street Journal. The takeover would create the third-largest quick-service restaurant provider in the world, they said.
Inversion deals have been on the rise lately, and are facing stiff opposition in Washington given that they threaten to deplete U.S. government coffers. A move by Burger King to seal one is sure to intensify criticism of them, since it is such a well-known and distinctly American brand.
A person familiar with the matter said a deal between the two companies could be struck soon, though additional details on timing couldn’t be learned. Tim Hortons has a market value of about $8.4 billion, while Burger King’s is about $9.6 billion, so together the restaurant companies are currently worth about $18 billion.
Over to Forbes
Canada’s corporate tax rate in Ontario of 26.5% (the federal rate of 15% plus Ontario’s provincial corporate tax rate of 11.5%) is considerably favorable to the American corporate tax rate of 35% thanks in large part to the conservative Canadian government led by Stephen Harper. The Harper government lowered the federal tax rate to 15% in 2012 down originally from 28% since it took office in 2006.
In fact, a recent KPMG Report, Focus on Tax, ranked Canada number as the #1 country with the most business-friendly tax structure among developed countries when adding up a wide range of tax costs to businesses from statutory labor costs to harmonized sales tax. When comparing developed countries to what companies pay in the U.S.; Canada came in at 53.6%, the U.K. came in at 66.6%, and the Netherlands at 74.5% of the U.S. corporate tax burden.
The total corporate tax costs for Canada are 46.4% less than the U.S. rate. This should send Team Obama into apoplexy, seeing as he wants legislation that restricts inversions. Obviously, calling for a lower corporate tax rate would be silly.