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The fast food chain Burger King made waves in the corporate world two weeks ago when it announced an agreement to merge with Tim Hortons, a Canadian doughnut and coffee chain, and relocate to Toronto. Financial analysts argued that the move – called a tax inversion – may help Burger King reduce its corporate tax burden since Canada has a lower corporate tax rate than the United States. President Obama and Democratic lawmakers criticized Burger King for joining the list of “corporate deserters,” a term applied to companies that have relocated their corporate headquarters outside of America’s borders to reduce their tax burden. Ohio Senator Sherrod Brown and leftist groups have called for a national boycott of Burger King as well. If the merger is approved by American and Canadian regulators, the new company will become the third-largest fast food chain in the world.
This topic brief will provide an overview of the Burger King-Tim Hortons merger and explain what tax inversions are, weigh the potential benefits and drawbacks of the merger for both brands, and evaluate how lawmakers might respond to Burger King’s tax inversion.
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