Revealed: Burger King Has Been Screwing American Taxpayers for Years

Over the last week, Burger King has been getting slammed for a scheme to worm out of its U.S. tax obligations, but a new report shows that’s just business as usual for the company. (Burger King decided to move its tax base to Canada by acquiring the Ontario-based coffee and donut chain Tim Hortons, which will allow the firm to get out of paying billions in U.S. taxes.)


Reuters just took a look at the fast-food giant’s regulatory filings in the U.S. and overseas, and found that Burger King has a sordid history of scamming taxpayers through creative accounting tricks that make profits magically appear in low-tax areas overseas. The company has been so successful at artful dodging that its taxes are among the lowest in the industry (26 percent compared to 31 percent for McDonald’s, Starbucks and Dunkin' Donuts). In the U.S., the headline federal corporate tax rate is supposed to be 35 percent on profits.

According to Reuters:

“Burger King generated almost 60 percent of its revenues in the United States between 2011 and 2013, regulatory filings show, but the chain reported just 20 percent of its profits in the country over the period.”

Hmm...that sure smells funny! Turns out Burger King has created tax structures that allow it to operate nearly tax-free in German and British markets. The company has also channeled income through Switzerland, which has enabled it to pay an effective tax rate of 15 percent on foreign income over the past three years.

Amid a firestorm of criticism, Burger King has claimed that the Canadian deal is not about tax savings, but rather a move to make Canada its largest market. Let’s call that what it is: a whopper.

Stephen Shay of Harvard Law School predicts that Burger King will dramatically reduce its tax bill over the next five years with more so-called “inversion” schemes which allow it to pretend it is not a U.S.-based company.

That means you and I are picking up the difference, paying to educate Burger King’s workers (and provide social services for the many who can’t afford to feed their kids or go to the doctor). We are paying to build the roads and infrastructure needed to move its products. We pay the courts to defends its rights both at home and abroad. We pay the military and diplomatic officials who ensure favorable markets around the world. We pay for police, firefighters, etc.  

Technically, Burger King's decision to move its headquarters to Canada is legal. The question is, why? It’s pretty obvious that the law should be changed to prevent this kind of scam. As President Obama recently said, companies that pull this stunt are “basically renouncing their citizenship and declaring that they’re based somewhere else, just to avoid paying their fair share” and are thus lacking in  “economic patriotism.”

The US Treasury secretary has been making noises about inversions being prohibited. That had better happen soon or more companies will be lining up to follow in the King’s footsteps.

Enjoy this piece?

… then let us make a small request. AlterNet’s journalists work tirelessly to counter the traditional corporate media narrative. We’re here seven days a week, 365 days a year. And we’re proud to say that we’ve been bringing you the real, unfiltered news for 20 years—longer than any other progressive news site on the Internet.

It’s through the generosity of our supporters that we’re able to share with you all the underreported news you need to know. Independent journalism is increasingly imperiled; ads alone can’t pay our bills. AlterNet counts on readers like you to support our coverage. Did you enjoy content from David Cay Johnston, Common Dreams, Raw Story and Robert Reich? Opinion from Salon and Jim Hightower? Analysis by The Conversation? Then join the hundreds of readers who have supported AlterNet this year.

Every reader contribution, whatever the amount, makes a tremendous difference. Help ensure AlterNet remains independent long into the future. Support progressive journalism with a one-time contribution to AlterNet, or click here to become a subscriber. Thank you. Click here to donate by check.

Close
alternet logo

Tough Times

Demand honest news. Help support AlterNet and our mission to keep you informed during this crisis.