Corporate Law Blog

Burger King accused of trying to dodge taxes by moving tax base to Canada

In our last post, we spoke about Burger King’s recent decision to acquire Canadian coffee and doughnut franchise Tim Hortons. As we noted, some Canadians have expressed concern that the acquisition will mar the character of the beloved Canadian chain. Another issue that has come up in connection with the acquisition is Burger King’s decision to change its tax base from the United States to Canada. The switch should allow the burger chain to reduce its U.S. tax obligations.

While some lawmakers have expressed frustration over the tax development, others have pointed out that the maneuver is consistent with the direction Burger King has been going for years now. Burger King, they say, has been trying to cut its U.S. tax bill for years now. The strategy over the years has been to reduce U.S. taxable profits and to maximize profits in countries with low taxes. All of this, of course, in the name of tax efficiency. 

For its part, Burger King has said the Tim Hortons deal was not to reduce taxes but to expand company growth into the combined company’s largest market. Not that it would be illegal for the company to attempt reducing its tax obligations, anyway.

Tax planning, of course, can be a complicated aspect of operating a business, and it is important for companies to work with experienced attorneys in managing this aspect of their operations, particularly as it pertains to mergers and acquisitions. Good tax planning is critical not only in terms of ensuring a company is in compliance with federal law, but also in terms of cutting unnecessary costs and running a business more efficiently.

Source: Reuters, “Burger King has maneuvered to cut U.S. tax bill for years,” Tom Bergin, September 2, 2014.