Thursday, August 28, 2014

Incentives Matter! The Burger King Edition

When corporations perceive the tax burden as excessive, they'll likely engage in tax avoidance/reduction measures.  A good example of this is the recent announcement by Burger King that it is moving its headquarters to corporate tax-friendly Canada.  Economist Mark Perry  provides this table (click to enlarge):

Perry provides this quote from a NYTimes article:
The restaurant operator said on Sunday that it was in talks to buy Tim Hortons, the Canadian doughnut-and-coffee chain, in a potential deal that would create one of the world’s biggest fast-food businesses.

If completed, the deal would mean Burger King’s corporate headquarters would move to Canada, raising the specter of yet another American company switching its national citizenship to lower its tax bill.
So, again: high taxes incentivize organizations and individuals to act in ways to reduce their tax burdens.