Have taxes your way. (Andrew Harrer/Bloomberg News)

Canada should be a cozy new home for Burger King.

The fast food giant stands to save as much as $1.2 billion in taxes over the next three years by moving its headquarters from the United States to Canada, according to a new report by Americans for Tax Fairness, a tax watchdog often critical of corporate tax maneuvers.

The bulk of the savings will come from forgone capital gains taxes, which would amount to as much as $820 million between now and 2018 for the company's shareholders if Burger King were not to reincorporate. But Burger King also stands to save more than $100 million in federal taxes in 2013, according to the report.

"Burger King’s inversion adds up to a 'whopper' of a tax dodge," the watchdog concluded in its study.

Ever since Burger King announced its plan to purchase Canadian chain Tim Horton's for $11 billion, the fast food giant has been criticized for what many believe is a maneuver driven primarily by tax benefits. The company would be able to move its headquarters to Canada, where the tax rate is lower.

Burger King, for its part, has consistently denied the claims. "As we’ve said all along, this transaction is driven by growth, not tax rates," the company said in a statement. "Going forward, we do not expect our tax rate to change materially."

But there's plenty of reason to question that claim.

By reincorporating abroad, as the practice is known, Burger King is effectively shifting its corporate citizenship, and, as a result, changing the corporate tax rate the company has to pay on its various forms of income. The nominal corporate tax rate in the United States, which combines national, state, and city-level tax rates, is nearly 40 percent—the highest across all 34 Organization for Economic Cooperation and Development (OECD) member countries—while Canada's is just over 26 percent.

The intricacies of corporate tax laws, especially when applied to companies that operate all over the world, as Burger King does, make it difficult to know exactly how much the company will save from its new Canadian citizenship. But if the company benefits at all in that regard, especially if the upside proves to be as substantial as Americans for Tax Fairness estimates can be, there could be a backlash in the company's birthplace.

Customers, after all, have proven unkind to corporate tax dodgers in the past. Starbucks saw its sales dip in the United Kingdom after the public learned the company was using complex accounting methods to pay less in taxes in the country.

Starbucks, however, is still based in Seattle, and subject to U.S. corporate tax rates. The coffeehouse pays an effective corporate tax rate of just under 33 percent, according to data from Standard and Poors Capital IQ. Burger King, on the other hand, currently pays much less—just over 25 percent—and is likely to downsize its tax payments even further. As you can see below, its current rate is already pretty low compared to other fast food companies.


(Source: Americans for Tax Fairness)