Question

For your initial post, complete an internet search for Burger King and Tax Inversion. Then, respond to the following questions: Is this idea of tax inversion a good business strategy? Is it ethical?

Essentials of Corporate Finance (9th ed.)

Answer 1

Tax inversion i sthe process by which a company tries to evade the tax by restructuring by merging with a foreign company and considers itself as a foreign company to evade the domestic taxes. In Burger King case similar thing happened where Burger king merged with canadian coffee and chain to become a canadian commpany.

The idea of tax inversion is a smart business strategy if only profit is the motive for a company. If theres is tax savings for a company due to tax inversion as in the case of Burger king, the company most probably will be better off eith tax inversion than continuing as a domestic company.

Eventhough, the process cant be termed ethical as it reduces the tax income that should have been obtained by the domestic company. It also brings a situation where all the resources of a country is made for a company to get profit, but there is no payback and another country is enjoying the benefits.