Big news this week that Burger King, a U.S. company, is planning to buy Tim Hortons, a Canadian one. This is another in a string of "tax inversion" deals where U.S. corporations move their corporate headquarters from the U.S. to elsewhere to avoid U.S. taxation. They don't actually change anything or move anyone outside of their accounting fairyland. Instead, they just check some different boxes on their income tax forms and "poof" -- save millions in taxes.
But the loss of U.S. taxes from BK is Canada's benefit right? Turns out, not so much. The only reason why this particular accounting trick works is because American corporations are taxed on worldwide profits, Canadian companies (and most other countries companies) are not. What that means is that American corps pay the American government taxes on all their profits no matter which country they are made in. Canadian companies only pay the Canadian government on profits made in Canada.
So the BK move to Canada would mean that BK will stop paying taxes on profits it makes in Kuwait to the U.S. government. However, since no Canadian company pays taxes on profits made in Kuwait in any event, Canadian governments would bring in no additional revenues. In BK's case, this would save them in the neighbourhood of $12 million a year in U.S. corporate taxes. Of course, Canada sees none of that money and essentially gains nothing from this deal.
In the end, many corporations want to pay $0 in income taxes and have the rest of us pick up the tab for health care and infrastructure that we all benefit from. "Tax inversion" is just one of the many accounting tricks that makes regular people pick up the tab for corporations that abuse tax rules or lobby governments to pay less and less every year.
David Macdonald is a senior economist with the CCPA.
Photo: Fernando Jorge Agüero/flickr
Thank you for reading this story…
More people are reading rabble.ca than ever and unlike many news organizations, we have never put up a paywall – at rabble we’ve always believed in making our reporting and analysis free to all, while striving to make it sustainable as well. Media isn’t free to produce. rabble’s total budget is likely less than what big corporate media spend on photocopying (we kid you not!) and we do not have any major foundation, sponsor or angel investor. Our main supporters are people and organizations -- like you. This is why we need your help. You are what keep us sustainable.
rabble.ca has staked its existence on you. We live or die on community support -- your support! We get hundreds of thousands of visitors and we believe in them. We believe in you. We believe people will put in what they can for the greater good. We call that sustainable.
So what is the easy answer for us? Depend on a community of visitors who care passionately about media that amplifies the voices of people struggling for change and justice. It really is that simple. When the people who visit rabble care enough to contribute a bit then it works for everyone.
And so we’re asking you if you could make a donation, right now, to help us carry forward on our mission. Make a donation today.