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Senators urge Burger King not to move to lower-tax Canada

A Burger King restaurant in Peoria, Ill.
(Daniel Acker, Bloomberg)

Five senators on Thursday urged Burger King Worldwide Inc. not to move to lower-tax Canada, accusing the company of trying to avoid paying its fair share for roads and other public services it receives in the United States.

The letter, organized by Sen. Richard Durbin (D-Ill.), was intended to increase pressure on Miami-based Burger King to keep its corporate headquarters in the U.S. and to highlight the off-shore tax-shifting practice known as inversion that President Obama and many Democrats want to limit.

“We believe you will find that turning your back on your loyal, U.S. taxpaying customers by renouncing your corporate citizenship is not in the best interest of Burger King or its shareholders,” the senators wrote to Burger King Chief Executive Daniel Schwartz.

“Many of your loyal customers may choose to spend their hard-earned money at one of your many competitors, instead of supporting a company that wants all the benefits of America but refuses to pay its fair share to support our nation,” the letter said.

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The letter, publicly released by Durbin’s office, also was signed by Sens. Carl Levin (D-Mich.), Jack Reed (D-R.I.), Bernard Sanders (I-Vt.) and Sherrod Brown (D-Ohio).

Burger King has become a focus of opponents of inversions, a maneuver in which a U.S. firm buys a smaller rival in a low-tax nation and reincorporates there to shelter earnings.

Burger King said last month it would move corporate headquarters to Canada as part of its purchase of Canadian coffee-and-doughnut chain Tim Hortons.

The deal was not driven by an attempt to lower its taxes, Burger King executives said, noting that Canada’s rate isn’t significantly lower than the overall tax rate the company paid last year.

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Because of Tim Hortons’ extensive presence in Canada, the country will be the largest market for the new combined firm. Burger King did not immediately respond to a request for comment.

The senators said the move “will allow Burger King to avoid paying millions in U.S. taxes.”

More than half of fast-food workers nationwide depend on government programs such as Medicaid and food stamps, the letter said.

And Burger King “relies on U.S. taxpayer-funded roads and bridges to deliver its products, safety inspectors to ensure the food it provides is safe for consumers, and a robust trademark system to protect its brand,” the senators wrote.

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“Now, after profiting from these taxpayer-funded benefits, Burger King intends to move its tax address overseas to avoid paying its fair share for these benefits,” the letter said.

Durbin has been one of the most outspoken critics of corporate inversions.

In July, he wrote to Illinois-based Walgreen Co. after reports it was considering shifting its headquarters to Switzerland after purchasing Swiss pharmacy retailer Alliance Boots.

In the face of public pressure, Walgreen decided not to move. The company said relocation wasn’t in the best long-term interest of the company’s shareholders.

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Durbin and other inversion opponents are trying to pressure Burger King, another high-profile consumer company, to make the same decision.

On Tuesday, Durbin said in a speech on the Senate floor that he avoided eating at Burger King two weeks ago, opting instead for lunch at Steak n’ Shake “which happens to be a franchise we are very proud of in the Midwest and in Illinois.”

The Obama administration has called on Congress to limit inversions, which have become more popular recently as companies try to avoid the high U.S. corporate tax rate.

Democrats have introduced bills in the House and Senate to crack down on the practice. The legislation would be retroactive to the spring, when the proposals were introduced and before a recent spate of high-profile deals.

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But there is little chance of legislation this year.

Key Republicans have accused the White House of playing politics with the issue and said the problem is best addressed as part of a broad overhaul of corporate taxes that would lower the rate and reduce the incentive to reincorporate abroad.

“President Obama has called inverting companies ‘corporate deserters,’ saying that they are ‘leaving the country to get out of paying taxes,’ and ‘renouncing their citizenship,’ ” Sen. Orrin Hatch (R-Utah) said in a speech Thursday to the U.S. Chamber of Commerce.

“The specific proposals the administration has endorsed are punitive and retroactive,” he said. “They are not designed to improve the business climate in the U.S. Instead, they are intended to build walls around American corporations.”

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Hatch, the top Republican on the tax-writing Senate Finance Committee, echoed comments Wednesday from House Ways and Means Committee Chairman Dave Camp (R-Mich.).

“Empty rhetoric and rifle shot bills will not keep American companies and jobs in this country,” said Camp, who has been a leading Republican proponent of corporate tax reform.

“Until we address the root of the problem, we will continue to read regular reports of companies leaving the U.S.,” he said.

Hatch admitted inversions are a problem and said he’s open to making a temporary fix as a prelude to corporate tax reform. But he reiterated he opposed any retroactive legislation.

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