Sick of paying your taxes every year? So are a lot of people, and especially corporations. Presidential candidates have promised to bring those companies back, but we were wondering how many of them there are and were surprised at the results. What we thought were tried and true American companies no longer seem to be located here. So without further ado, check out these U.S. companies that left for the purpose of tax evasion.
More on Tax Inversion
These companies aren’t simply packing their bags and setting up an address overseas. They are performing what is called a “tax inversion.” This is where an American company merges with one located in a country with lower taxes. They then either give the owners of the foreign company at least a fifth ownership of the new business or do at least one fourth of its business overseas. From 1983 to 2003, only 29 U.S. companies did a tax inversion. From 2004 to 2013, 47 U.S. companies have completed a tax inversion, with more anticipated in the future.
1. Burger King
What’s more American than cheeseburgers? Apparently Canada, as that is where the fast food giant that used to be located in Miami moved to in order to tax invert. With the American corporate tax rate of 35%, the owners and proprietors of Burger King found that Ontario’s rate of 26.5% was far more favorable, Canadian federal rate of 15% plus an 11.5% state rate. This was in response to Canada lowering their rates from 28%. A report published in 2014 named Canada as the leading country for tax structures, with the United Kingdom second and the Netherlands at third. Burger King saved so much money, it considered buying Canadian giant Tim Horton’s (coffee and doughnuts) that same year.
2. Pfizer
The pharmaceutical giant that is behind Viagra, Lipitor, Lyrica, Zithromax, and many other drugs was founded all the way back in 1849 in a simple brick building in Brooklyn. For years now, the company has been threatening to tax invert by buying cosmetic surgical product giant Allergan (a leading supplier of breast implants). Earlier Pfizer had put in a $160 billion bid to buy Astra Zeneca in order to tax invert but was blocked. If it is successful in this current bid, its 78,000 employees will be in danger, and its $50 billion in revenue will be moved overseas.
3. Ford
Have you heard Donald Trump’s outrage over Ford moving a plant to Mexico? It isn’t the first time the auto maker has moved operations in order to save taxes, and we don’t think it will be the last. Earlier this year, Ford revealed it would be building a new car assembly plant for its small cars south of the border and take thousands of jobs with it. The company will invest $1.6 billion to create 2,800 additional direct jobs in Mexico by the end of 2020, and construction on the plant is set to begin as soon as this summer. This has been going on for a while with Mexico being Ford’s 4th largest manufacturing site behind China at 3rd, Germany at 2nd, and the United States at first. With all this movement, is a complete move far behind?
4. Nabisco
In another move made famous by Donald Trump, the makers of Oreos, Chip Ahoy, and many other American favorites have made the move south of the border. In 2015, Nabisco laid off half of its 1,200 employees in its Chicago branch in order to maximize the efficiency of their new factory in the city of Salinas, Mexico. The company needed to spend an additional $130 billion to upgrade its American factory, even though the Mexican corporate tax rate of 30% isn’t too much better than the American – if you think $6.5 billion isn’t a lot of money.
5. Medtronic
You may have never heard of them, but if you use a medical device, chances are it was made and/or designed by them. Medtronic was founded in 1949 in Minneapolis to repair medical equipment and evolved to take in revenues in the billions, employ 84,000 people, and assist millions of patients. In 2014, the company moved its headquarters to Ireland, a favorite among pharmaceutical and medical companies. With $13 billion in assets set to be taxed at a rate of 35%, it begs the question: would you move for $4.55 billion dollars?
The Future of Tax Inversion
Only the new president and Congress can decide whether to continue policies that drive away business or work with them to some mutual benefit, but here’s what President Obama has said of this: “It’s not that they’re (corporations) breaking the laws, it’s that the laws are so poorly designed that they allow people…to wiggle out of responsibilities … that lost revenue has to be made up somewhere.”
For more information on U.S. companies leaving because of taxes, check out Bloomberg’s quick take.
Houston Tax Evasion, er Preparation Help
If you live in the area and need Houston tax preparation help or bookkeeping in general, send us an email or give us a call at 281-894-6494.