Burger King Move to Canada Draws Criticism

 Posted on August 03,2014 in Taxation Law

Burger King recently announced that it will soon acquire Tim Horton's Inc. of Canada, and will move its base to Canada as a result. The deal is backed by billionaire Warren Buffett, who is already under criticism because the move amounts to inversion.

Recently, Burger King announced that it had signed an $11 billion agreement to buy Tim Horton's, which is the one of the largest coffee- and- doughnut chains in Canada. This falls under the "inversion" category, and Burger King's headquarters will now move from Miami to Canada. It helps that Canada has a much lower tax structure compared to the United States. Burger King shareholders as a result of the move, will also be protected from capital-gains taxes.

Inversions, or corporate moves overseas like these, are mainly meant to save corporate taxes, and such inversions have been criticized roundly by lawmakers. The White House recently pitched in, saying that such companies that want to move outside the United States and move their bases to foreign lands simply to avoid taxes are being unpatriotic. Burger King denies that minimizing taxes is behind its deal. It says that the deal is aimed at capturing new growth opportunities.

Criticism is also being leveled at Warren Buffett, always known as a patriotic American. The 83-year-old billionaire has publicly spoken out in favor of higher taxes for the super wealthy. In fact, in 2011 he clearly laid out in an essay why the superrich in America should pay more in taxes. That actually led to the Buffet Rule, which provides for fairness in tax matters.

Buffet has invested approximately $3 billion in this deal, in his position as chairman of Berkshire Hathaway Inc. According to him, the Burger King- Tim Horton's deal does not really fall under the category of inversion, and he would never have supported it if it did.