Deep Tax Cuts Opens Northern Front for U.S. Companies [View all]

[Purveyor]

By Scott Deveau and Eric Lam Aug 26, 2014 10:54 AM ET

Canada has become the latest frontier for U.S. companies fleeing the high cost of business, spurred by low corporate taxes and a policy that keeps international earnings out of the clutches of the Internal Revenue Service.

Burger King Worldwide Inc. (BKW), the second-largest U.S. burger chain, agreed to buy coffee-and-doughnut company Tim Hortons Inc. today for about C$12.5 billion ($11.4 billion) and move the headquarters of the combined company to Canada. It’s “not fair” that companies can renounce their U.S. citizenship by filling out paperwork, a White House spokesman said yesterday.

The deal, which is still subject to the standard approvals, for Oakville, Ontario-based Tim Hortons follows Valeant Pharmaceuticals International Inc.’s merger with Canada’s Biovail Corp. in 2010, which sparked the latest so-called tax-inversion wave.

Burger King is unlikely to be the last U.S. company to consider moving north even as President Barack Obama and his aides try to curb the practice, tax experts say. In addition to avoiding U.S. taxes on global earnings, companies like Burger King can take advantage of Canadian tax rates that have been cut by about a quarter in the past eight years.

“We have now made it a lot more attractive for companies to say Canada is a good place to set up shop,” said Jack Mintz, director of the University of Calgary’s School of Public Policy.

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http://www.bloomberg.com/news/2014-08-25/tim-hortons-targeted-as-u-s-tax-inversion-heads-north.html