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Burger King backlash over whopper 'tax inversion' deal with Tim Hortons

Politicians and customers blast chain as it announces it is in talks to buy Canadian coffee and doughnut giant Tim Hortons
  • @mariatad

Burger King's "tax inversion" merger with Canadian doughnut chain Tim Hortons has sparked calls for a boycott with politicians and customers accusing the American fast food chain of tax-dodging.

On Monday, shares of Tim Hortons and Burger King jumped more than 20 per cent after the two companies, which are similar in size by market value, confirmed they are in talks to create the world's third biggest fast food chain with a combined worth of approximately $18 billion.

The new firm would be based in Canada, where corporate tax is 26.5 per cent, compared to 35 per cent in the United States, where Burger King is currently headquartered.

However, the announcement was met with criticism by Burger King fans on social media, where customers threatened to boycott the chain if the merger goes ahead, accusing the chain of "tax dodging" in a predominantly negative 3000-comment thread.

One user wrote on Burger King's Facebook page: "If you attempt to buy Tim Horton's for the purposes of evading US Taxes, I will NEVER step foot in another Burger King again...Don't do it"

Another customer added: "Done eating at BK if you become a tax cheat you can count my family of seven as former customers."

A spokesman for Burger King said the comments represented a small fraction of the company's more than seven million followers on the social media site.

The merger is the latest in a series of so-called "tax inversion" deals by US firms, which allow American companies to move their headquarters to a country with a lower tax rate by acquiring or merging with a foreign company.

Democrat senator Sherrod Brown blasted the move and called for a boycott of Burger King products, urging customers to support "companies that haven’t abandoned their country".

"Burger King’s decision to abandon the United States means consumers should turn to Wendy’s Old Fashioned Hamburgers or White Castle sliders," he added . "Burger King has always said ‘Have it Your Way’; well my way is to support two Ohio companies that haven’t abandoned their country or customers."

It is understood Burger King's majority shareholder, 3G Capital, will stay in control of the new company if a deal is completed with Tim Hortons, which was previously owned by fast food rival chain Wendy's before it was spun off in 2006.

Warren Buffett, the billionaire chairman of Berkshire Hathaway, is set to provide 25 per cent of the deal's financing, according to sources speaking to the Wall Street Journal.

The news may come as a surprise after the 83-year old spoke against tax inversion earlier this year, arguing that "it does get a little annoying when we see other people paying far lower tax rates while engaging in the same sorts of businesses that we engage in".

Burger King reported revenue fell 6.1 per cent to $261.2 million in the second quarter, although same-store sales in the US and Canada rose 0.4 per cent.