A rising tide of US companies is expected to flood foreign shores in the next 12 months, shifting their legal domicile overseas to save billions in punitive US taxes, according to experts.
By next year, the US economy could be defined by growing capital flight, says one leading expert, as more domestic companies reach for the life jackets, escaping America’s top marginal corporate tax rate of 39.1 percent — the world’s third-highest, behind the United Arab Emirates and Chad.
“I predict capital flight could become a real issue from 2015,” said Nigel Green, founder and CEO of deVere Group, sounding the alarm on the US economy’s tax prospects.
Burger King last week reinforced Green’s argument. The iconic American brand may be the home of the renowned Whopper — but it will have a flipping nice cross-border tax dodge under its pending $11 billion purchase of Tim Hortons, Canada’s coffee-and-doughnut chain, analysts say.
Burger King’s Miami-based HQ would transfer to Canada under a controversial “inversion” arrangement.
The deal, ironically, is backed by a $3 billion investment from Warren Buffett. Buffett has previously advocated higher taxes on the wealthy.
The Great White North, Burger King’s new home if the deal is finalized, recently slashed its federal corporate tax rate to 15 percent.
With the juiced-up tax savings, experts say Burger King could sizzle a lot more than the Whopper. The hamburger giant reported a sizzling profit of $234 million last year — twice as much as in 2012.
The deal is also set up to dodge certain capital-gains taxes.
Burger King insists its acquisition of Tim Hortons is strategic. Burger King reportedly pays an estimated 27.3 percent effectively in corporation taxes.
“We don’t expect our tax rate to change materially,” Burger King CEO Daniel Schwartz said in a conference call. “This transaction is not really about taxes. It’s about growth.”