When news broke that Burger King was attempting to avoid high corporate tax rates by moving to Canada, people were immediately up in arms.
Some politicians have even called for a boycott. Many Americans also seem to view this plan as unpatriotic in the sense that moving businesses out of the United States hurts the economy.
Perhaps those who are angry are missing the point, however. This isn't personal, it's business. The United States has the highest corporate tax rate in the world at 35 percent. In Canada, the corporate tax rate is 15 percent.
This is nothing new; when tax rates are high, businesses sometimes relocate to increase revenue. Burger King is certainly not the first company to do so. In the past three years, more than 22 companies have relocated abroad.
By merging with or purchasing smaller companies in other countries with lower tax rates, large companies can relocate their headquarters. This practice, known as " tax inversion," essentially allows them to become foreign entities.
In Burger King's case, this company is Tim Horton, and the location is Ontario, Canada. In many ways, it could simply be considered an address change for the sake of lower tax rates and higher profits.
It's somewhat ironic that individuals in the most capitalistic country in the world (USA) would lambast a corporation for trying to maximize its profits. After all, capitalism is inherently about the survival of the fittest.
Furthermore, it's important to note that Burger King's plan to relocate its headquarters might not just be an attempt to benefit from lower tax rates. Burger King might be relocating in order to appease Canadian regulators to make the merger with Tim Hortons run more smoothly.
Lower tax rates could just be an added benefit.
This is a globalized world: If you are really that upset about businesses relocating and jobs being outsourced, you will basically have to renounce all corporate ties.
Apple is a prime example. The company has hundreds of billions of dollars in profit sitting overseas, yet it still borrowed billions of dollars from the United States.
Apple, like other corporations, keeps its money overseas in order to avoid taxes. I wonder how many people sent angry tweets about Burger King from their iPhones?
Corporations will always do what they can to maximize profits. Thus, instead of attacking individual corporations for these kinds of practices, it might be helpful to take a hard look at the capitalistic system that produces incentives for them to employ such tactics.
When a company moves abroad in order to avoid high tax rates, it's not unpatriotic, it's pragmatic. Individuals try to find ways to reduce their taxes all the time, corporations are no different.
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