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Burger King and the corporate tax realm

The King is considering a move to Canada, but are taxes really cheaper in that realm?

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As Burger King waves farewell, inching towards buying Tim Hortons and moving to Canada, Americans are feeling abandoned by what could soon become the third largest fast food chain in the world — and looking for someone to blame. The Kings’ finger is pointing towards America’s high corporate tax rate, but the issue might not be that simple.

A recent paper published in August by Edward Kleinbard of the University of Southern California argued that companies aren’t moving to countries like Ireland, Britain and Canada because the taxes are cheaper. In fact, what companies pay in corporate taxes in the United States is actually much less than many countries’ tax rates abroad.

According to the U.S. Government Accountability Office, while the U.S.’s sticker corporate tax rate is at 35 percent, companies end up paying, on average, nowhere near that amount. What they do pay is closer to 13 percent for federal income taxes and 17 percent for total foreign, state and local income taxes — which is actually less than Canada’s 15 percent federal tax rate for a combined total that is around 25 percent. The same study found that from 1998 to 2005, more than half of all large, U.S. companies were exempt from paying all federal taxes for at least one year.

What motivates countries to move and stay abroad, Kleinbard argued, is the ability to access money stored overseas. However, for Burger King’s case, the attraction may be a Canadian policy to not tax dividends that are already taxed by another country.

While the decision may save the company money, it could also cause a loss in sales — many in the U.S. expressed discontent at the tax dodge. Others just weren’t happy that their all-American burgers would soon turn Canadian.

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