The agreement between Burger King Worldwide Inc. (NYSE: BKW) and Canada-based Tim Hortons Inc. (NYSE: THI) has brought the tax inversion issue back to the front burner again. That Warren Buffett is also part of the transaction only intensifies the heat.
According to Canada’s finance minister, the country’s corporate tax rate has dropped from 20% to 15% since the Conservative government took office in 2006. The U.S. tax rate is 35%, making the tax advantage for Burger King’s move to Canada a central part of the deal.
Cutting corporate tax payments has become a way of life for some companies. A Tuesday report at USA Today names seven companies that have cut their effective tax rates and boosted their net income at the same time in each of the past five years.
At the top of the list is Google Inc. (NASDAQ: GOOG), which has cut its effective tax rate from 27.8% to 15.7% while boosting net income by 205.7% in the period from 2008 to 2013.
TripAdvisor Inc. (NASDAQ: TRIP) came second, cutting its effective tax rate from 39.3% to 27.8% at the same time that net income rose 183.9%.
PetSmart Inc. (NASDAQ: PETM) managed to cut its effective tax rate from 38.6% to 36.3% while growing net income by 117.7%.
Oracle Corp. (NYSE: ORCL) has cut its tax bill from 27.9% to 19.8% while raising net income by 92.2%.
Genuine Parts Co. (NYSE: GPC) cut its effective tax rate from 38.1% to 34.4% over the five-year period while boosting net income by 44.1%.
International Business Machines Corp. (NYSE: IBM) cut its tax rate from 26.2% to 15.6% and raised its net income by 33.6% in the period.
Kohl’s Corp. (NYSE: KSS) cut its effective tax rate from 37.6% to 36.7% and raised net income by 3.7%.
None of these companies has re-domiciled offshore, but Google had parked $38.9 billion offshore at the end of 2013, while IBM held $52.3 billion outside the United States. According to a report at Bloomberg, General Electric Co. (NYSE: GE) is the tax-avoidance leader with $110 billion in offshore cash, and Microsoft Corp. (NASDAQ: MSFT) is second with $76.4 billion held offshore. The top 22 companies in offshore holdings have amassed $984 billion in foreign subsidiaries. All told, multinational companies have parked $1.95 trillion offshore.