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Wednesday, August 27, 2014

Burger King's tax dodge sparks national outrage

(photo: Anne-Christine Poujoulat/AFP/Getty Images)
(photo: Anne-Christine Poujoulat/AFP/Getty Images)

By Carl Gibson, Reader Supported News
27 August 14

ne of America’s largest, most iconic fast food chains is now risking its entire brand on a tax dodge that a majority of Americans view as greedy and unpatriotic. Even though Burger King’s recent $11 billion purchase of Canada-based Tim Horton’s has already gone through, the 800-pound gorilla in the room is Burger King’s consumer base. And it appears that gorilla is already moving on to other feeding grounds.

In acquiring Tim Horton’s, Burger King is using a tax dodge called “inversion” in which it renounces its U.S. citizenship to pay Canada’s 15 percent corporate tax rate. Burger King admitted on its own Facebook page that its headquarters would still be in Miami, and that Tim Horton’s would remain an independent brand. Burger King’s workers would still remain in America, as would the majority of Burger King’s restaurants and revenue. Inversion is simply an accounting loophole that forces U.S. taxpayers to foot Burger King’s multi-billion dollar tax bill.

Wealthy shareholders, many of whom are executives who own stock options, would fatten their pockets with bigger dividends, and U.S. taxpayers would see more budget cuts to public services as a result of the drop in Burger King’s tax revenue. Both Burger King and Tim Horton’s saw their share prices increase with the announcement of the acquisition. A handful of rich people win. The people lose.

One oft-quoted statistic is that at 35 percent, America’s corporate tax rate is the highest in the world. But when accounting for all of the loopholes, credits, and deductions that American corporations take advantage of, the U.S. is revealed to be an incredibly low-tax country for corporations. The U.S. raises just 2.1 percent of its total tax revenue from corporate taxes in relation to total GDP, compared to Canada’s 2.5 percent. And compared to other Organization for Economic Cooperation and Development-affiliated (OECD) countries, the U.S. has the 5th lowest effective corporate tax rate at 13.4 percent. Canada’s effective corporate tax rate is 14.5 percent. Even though Canada has a lower corporate tax rate, there are far fewer loopholes to take advantage of in the tax code, equating to a greater overall share of tax revenue for Canada’s public services, like universal health care.

And even though the U.S. has, on paper, the highest corporate tax rate, everyday individual taxpayers, like Burger King’s customer base, foot most of the tax revenue for public services. Yet, while Canadians are overwhelmingly satisfied with their taxpayer-funded health care system, Americans get remarkably shoddy services in return for paying most of the taxes. The World Health Organization has ranked our health care system, which is the only for-profit, market-based health care system in the world, as the world’s most expensive and inefficient. American college students are expected to go decades into a debt for a college degree, while European college students get a relatively free higher education in exchange for paying taxes. Other countries with lower corporate tax rates than ours also enjoy a vast social safety net like a retirement cushion, stable childcare services, paid sick and paternal leave (paid maternal leave goes without saying), and many other benefits. If corporations actually paid a 35 percent tax rate, we would have more than enough revenue to provide all of these services and more to American taxpayers.

Walgreens had planned to undergo inversion to avoid taxes, but blowback from customers scrapped that deal. Judging from Burger King’s awkward PR responses on Facebook and Twitter, the company is feeling the heat from angry customers. A petition targeted at Burger King customers garnered more than 50,000 signatures in just 24 hours, with customers promising to boycott the restaurant unless the company’s board of directors reneges on the deal.

Burger King’s inversion move is a slap in the face to the customers who make their billion-dollar profit margins possible, and to the country that allows them to make those profits. Taxpayer-funded meat inspectors make sure Burger King’s beef is safe to eat. Burger King pays its workers so little that they can’t afford health care and food for their families on their meager salary, so taxpayer-funded Medicaid and WIC programs pick up their slack. Burger King gets its ingredients trucked in on taxpayer-funded roads. And in return for all of these services provided by American taxpayers, Burger King won’t even pay the American corporate tax rate.

Burger King’s executives and shareholders might see a short-term benefit from the Tim Horton’s acquisition, but their greed will hurt them in the long term. Restaurant market research has shown that Americans are overwhelmingly fed up with mediocre burgers from fast food joints like Burger King. Dodging taxes on top of making sub-par food may just be the nail in the coffin for Burger King’s future as a fast food chain.


Carl Gibson, 26, is co-founder of US Uncut, a nationwide creative direct-action movement that mobilized tens of thousands of activists against corporate tax avoidance and budget cuts in the months leading up to the Occupy Wall Street movement. Carl and other US Uncut activists are featured in the documentary "We're Not Broke," which premiered at the 2012 Sundance Film Festival. He currently lives in Madison, Wisconsin. You can contact him at carl@rsnorg.org, and follow him on twitter at @uncutCG.

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