Politicians feel businesses work for government and their only function is a source of tax revenue
I’m not sure how else you interpret this “inversion” nonsense.
Burger King Worldwide Inc. is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc., a deal that would be structured as a so-called tax inversion and move the hamburger seller’s base to Canada.
The two sides are working on a deal that would create a new company, they said in a statement, confirming a report on the talks by The Wall Street Journal. The takeover would create the third-largest quick-service restaurant provider in the world, they said.
The point of this sort of a merger, beside the business aspect, is to move the headquarters of Burger King to a lower tax nation:
Inversion deals have been on the rise lately, and are facing stiff opposition in Washington given that they threaten to deplete U.S. government coffers. A move by Burger King to seal one is sure to intensify criticism of them, since it is such a well-known and distinctly American brand.
By moving to a lower-tax jurisdiction, inversion deals enable companies to save money on foreign earnings and cash stowed abroad, and in some cases lower their overall corporate rate. Even though many of the headline-grabbing inversion deals of late have involved European companies, Canada has also been the focal point for a number of them, given its proximity and similarity to the U.S. Canada’s federal corporate tax rate was lowered to 15% in 2012.
And surprise – Canada’s economy is picking up steam and corporations are eyeing it as a place to locate. Imagine that.
Canada’s corporate tax rate in Ontario of 26.5% (the federal rate of 15% plus Ontario’s provincial corporate tax rate of 11.5%) is considerably favorable to the American corporate tax rate of 35% thanks in large part to the conservative Canadian government led by Stephen Harper. The Harper government lowered the federal tax rate to 15% in 2012 down originally from 28% since it took office in 2006.
In fact, a recent KPMG Report, Focus on Tax, ranked Canada as the #1 country with the most business-friendly tax structure among developed countries when adding up a wide range of tax costs to businesses from statutory labor costs to harmonized sales tax. When comparing developed countries to what companies pay in the U.S.; Canada came in at 53.6%, the U.K. came in at 66.6%, and the Netherlands at 74.5% of the U.S. corporate tax burden.
Meanwhile, our politicians are trying to find a way to prevent that, because, well because they apparently think corporations work for them and exist to pay whatever tax rate they deem necessary. Of course, in a free country, this wouldn’t even be an issue. Corporations, like people, have the right to move wherever they wish. It is their call, not the government’s.
But, here that’s not the case:
Burger King’s possible merger to obtain the favorable Canadian corporate tax rate is a true reflection of the American corporate tax rate being the highest in the OECD. However, rather than taking the same stance on outright cutting the corporate tax rate as the Harper government did to keep the U.S. a competitive place to do business, President Obama calls tax inverting companies like Burger King “corporate deserters who renounce their citizenship to shield profits”. At the urging of President Obama, Congress is considering a bill to make it harder for companies to change addresses abroad. Treasury Secretary Jacob Lew called for a “new sense of economic patriotism,” asking Congress to pass curbs to inversions. The Treasury Department currently is also preparing options to deter or prevent corporate tax inversions potentially on its own.
“Corporate deserters”. “Economic patriotism”. It’s Orwellian Newspeak at its finest. Imagine anyone trying to “shield profits” from a grasping and out-of-control government. It is also another, in a long line of indicators, that this is no longer a free country in the sense we used to believe it was. It is now a country where every other entity is subservient to the needs or wants of intrusive, controlling government.