Burger King buying Tim Horton's and moving to Canada

[Casper]

http://www.washingtonpost.com/blogs/wonkblog/wp/2014/08/25/burger-king-is-mulling-a-move-to-canada-for-breakfast-and-lower-taxes/

[bloodninja420]

I am loving the outrage on my Facebook feed over this one.

I just can't even relate to the thought process that demonizes a 100% rational business decision instead of a tax code that incentived that behavior.

[Connie14]

What is Uncle Sam's fair share of Burger King’s money? It's funny to see people get mad about this issue. The individuals that get mad also don't want to pay higher taxes, but they will want to create more bureaucracy to prevent corporate inversions. This is free market economics 101.

It is beyond time to simplify the tax code and streamline our bloated government.

Edited August 27, 2014 by Connie14

[RCBS]

Economically challenged here...but aren't corporations treated as "people"? Why would they not be taxed as such? Certainly the earnings of this person would fall into the highest bracket.

[smccrory]

Economically challenged here...but aren't corporations treated as "people"? Why would they not be taxed as such? Certainly the earnings of this person would fall into the highest bracket.

 

People are pissed, not because it's illogical or illegal, but because it's unfair.  They benefit from U.S. infrastructure but don't want to pay for it.

 

Companies now have the ability to discriminate based on religious grounds and contribute massive amounts of political money to super pacs with only the vaguest of disclosure.  They enjoy public infrastructure in ways that go far beyond an individual's, so why shouldn't they pay for the very environment that enables their profit?

 

It's easy to say that the U.S. has high corporate tax rates which are driving companies out of country.  But like you guys allude to re: tax code, tax attorneys and CPAs make careers out of exploiting loopholes (and lobbying for loophole existence), and that will only go away if we vastly simplify the tax code.  But good luck making that happen without the balance being tilted even more towards corporations with corporate tax attorneys and CPAs on the scene to craft the simplifications.  It's like letting bankers and ex-bankers craft financial regulations.

[DAC]

These are global companies.  Why would they pick a spot on the globe to legally domicile themselves where taxes are higher?  Capital is like water - seeking the low spots.  Trying to prevent that is the source of the frustration.

Edited August 27, 2014 by DAC

[Tpoppa]

Lots of Americans (let's call them democrats) have been screaming for corporations to pay more taxes and for CEO pay to be limited.  All this will do is motivate corporations and talented CEOs to go elsewhere.

 

Corporations have been doing the same thing between states for decades.  Lots of companies choose to incorporate in Delaware for example.

http://www.bizfilings.com/learn/incorporate-delaware-nevada.aspx

 

Ohio on the other hand has some of the highest tax burden in the US (Income + property + sales tax + local tax), so why would a company choose to have operations in Ohio?

[smccrory]

Indeed that is the "beauty" of capitalism - It can be relied upon to find the most efficient mechanism towards profit, even when it burdens the public with its shadow.  That's it, really.  Certainly the public benefits from capitalistic ventures but it's also burdened by them.  The debate, therefore, is about balance.  I personally believe that the corporate tax rate is too high, but there are too many loopholes which end up making the largest of corporations pay far less than personal tax rates.

[Tpoppa]

Let's say you were trying to stimulate the economy & create jobs in you country/state/county/etc.  Would it make more sense to:

1.  Create a business climate where the corporation will always pays their perceived fair share of taxes, or

2.  Create a business climate where the corparation has a lower tax burden and is likely to remain profitable long term, then tax the employees to pay their fair share? 

 

 

Hell, I recently moved from Cuyahoga to Lorain county.  One of the reasones was to avoid higher propetry, local, and sales tax.  Cuyahoga has the highest sales tax in Ohio, Lorain has the lowest (btw, they are next to each other).

[Strictly Street]

http://en.wikipedia.org/wiki/Tim_Hortons

Looks like it's been moved for tax purposes a couple of times already. Nobody complained then. What makes now different?

  Merger with Wendy's

A Tim Hortons/Wendy's sign in Milton, Ontario

In 1992, the owner of all Tim Hortons and Wendy's Restaurants in Prince Edward Island, Daniel P. Murphy, decided to open new franchise outlets for both brands in the same building in the town of Montague. Murphy invited Joyce and Wendy's chairman Dave Thomas to the grand opening of the "combo store", where the two executives met for the first time and immediately established a rapport.

Murphy's success with combining coffee and doughnuts with Wendy's fast food led to the 8 August 1995 acquisition of and merger with TDL Group by Wendy's International, Inc., an American company.^[17] Joyce became the largest shareholder in Wendy's, even surpassing Thomas. TDL Group continued to operate as a separate subsidiary from its head office in Oakville, Ontario, although Joyce eventually retired from active management to pursue other interests.

Regaining independence

A Tim Hortons store in New York City.

Under pressure from rival restaurateur Nelson Peltz, in late 2005, Wendy's announced it would sell between 15% and 18% of the Tim Hortons operations in an initial public offering, which was completed on 24 March 2006, and subsequently said it would spin off to shareholders its remaining interest by the end of 2006.^[18] Wendy's cited increased competition between the two chains and Tim Hortons' increasing self-sufficiency as reasons for its decision, but the company had been under shareholder pressure to make such a move because of the strength and profitability of the Tim Hortons brand.^[19] Peltz in 2008 acquired Wendy's after pressuring them initially to spin off Tim Hortons.

Shares of the company began trading on 24 March 2006, with an initial public offering of C$27 per share, raising over $700 million in the first day of trading. On 24 September 2006, Wendy's spun off the rest of its shares in Tim Hortons, by distributing the remaining 82% to its shareholders.^[20] On the same day, Tim Hortons was added to Canada's benchmark stock-market indicator, the S&P/TSX Composite Index, and to the S&P/TSX 60.^[21]

Despite maintaining its operational headquarters in Oakville, the spun-off holding company, Tim Hortons Inc., was initially incorporated in Delaware.

Repatriation

On 29 June 2009, Tim Hortons Inc. announced that, pending shareholder approval, the chain's operations would be reorganized under a new publicly traded company, also named "Tim Hortons Inc.", incorporated under the Canada Business Corporations Act. The change was being made primarily for tax purposes.^[22][23]

On 28 September 2009, Tim Hortons Inc. announced it had completed the reorganization of its corporate structure to become a Canadian public company.^[24][25]

In November 2010, Tim Hortons extended Interac debit payment system acceptance to most of its stores. The company previously began accepting Interac in its stores in Western Canada in 2003 and, later, MasterCard and MasterCard PayPass across most of its stores in 2007. The company often indicated the delay of broader or wider electronic payment acceptance was to "ensure speed of service".^[26][27] In 2012, Tim Hortons began accepting Visa cards, and in 2013, began accepting American Express cards.^{[citation needed]}

Acquisition by Burger King

On August 24, 2014, U.S. fast food chain Burger King announced that it was in negotiations to merge with Tim Hortons Inc.; the proposed $18 billion merger would involve a tax inversion into Canada, with a new holding company majority-owned by 3G Capital, and the remaining shares in the company held by current Burger King and Tim Hortons shareholders. A Tim Hortons representative stated that the proposed merger would allow Tim Hortons to leverage Burger King's resources for international growth; the two chains would retain separate operations post-merger.^[28][29] News of the proposal caused Tim Hortons' shares to increase in value by 28 percent.^[30]

On August 25, 2014, Burger King officially confirmed its intent to acquire Tim Hortons Inc. in a deal totalling CDN$12.5 billion (US$11.4 billion).^[31] 3G Capital will purchase the company at $65.50 per-share; existing shareholders will receive $65.50 in cash and 0.8025 shares in the new holding company per-share—all-cash ($88.50) and all-shares (3.0879) options will also be available. 3G Capital (which currently holds a 71% majority stake in Burger King) will hold a 51% majority stake in the new company, Tim Hortons' existing shareholders will own 22%, and Burger King's will own 27%. The new entity will be based in Oakville and listed on both the TSX and New York Stock Exchange. Burger King CEO Daniel Schwartz will serve as CEO of the company, with existing Tim Hortons CEO Marc Caira being vice-chairman and director; Burger King itself will still operate out of its existing headquarters in Miami. The deal is subject to approval by Tim Hortons shareholders and regulatory authorities, and will form the third-largest fast food restaurant chain in the world. Caira reassured the integrity of Tim Hortons following the purchase, stating that the acquisition would "enable us to move more quickly and efficiently to bring Tim Hortons iconic Canadian brand to a new global customer base."^[30][32]

Edited August 27, 2014 by Strictly Street

[ohiomike]

Perhaps all large corporations should move their headquarters outside of the US, then the entire tax burden of running this country can be born 100% by its citizenry.

[Tpoppa]

These are the base rates.  Obviously, the effective rate can be different.  Still a decent reference:

[ohiomike]

Since their tax rate is going to drop, think they will also drop prices?

[Tpoppa]

I doubt that would satisfy the financial goals of their shareholders.

[ohiomike]

Exactly.

[smccrory]

Perhaps all large corporations should move their headquarters outside of the US, then the entire tax burden of running this country can be born 100% by its citizenry.

 

That's pretty much how it was at the turn of the century, and exactly what we'll be closer to if tea-party Ayn Randian capitalism has its way.  If those elements keep pushing enough for it, I wouldn't be surprised at all with a Marxist/Socialist backlash in 50 years when society once again has enough of companies leaving wasted resources and sick people behind for our children to clean up.

 

Speaking of, pure Marxism and Socialism have been shown time and time again to be awesome ideas that don't work on their own.  Humans aren't evolved beyond self-interest, so successful economic policy needs to account for and harvest self-interest to motivate desired behaviors that benefit both individuals bearing risk for reward, and also shared public resources and interests.  One desired behavior, I would argue is NOT to create robber barons that refuse to pay for their use, maintenance and culture of a market's infrastructure and resources.

 

I really like TPoppa's post...

 

Let's say you were trying to stimulate the economy & create jobs in you country/state/county/etc.  Would it make more sense to:

1.  Create a business climate where the corporation will always pays their perceived fair share of taxes, or

2.  Create a business climate where the corparation has a lower tax burden and is likely to remain profitable long term, then tax the employees to pay their fair share? 

Hell, I recently moved from Cuyahoga to Lorain county.  One of the reasones was to avoid higher propetry, local, and sales tax.  Cuyahoga has the highest sales tax in Ohio, Lorain has the lowest (btw, they are next to each other).

 

Because it unemotionally describes several of the key debates.  What is "fair share?"  Heck, is there even something called "public/common interest" that must be fairly shared (pure capitalists doubt there is)?  Should citizens pay all or most of what it takes to run, maintain, invest in and protect the country (since businesses benefit the public), or should businesses pay for all or part of that since they can't do business without live consumers, workers, roads, telecommunications, clean water, etc.

 

I don't think it's unreasonable at all to temper capitalism's "efficiency" and make players pay a tax for the environment they operate in.  We can disagree about the levels, but anyone who thinks government and the tax man should get out of the way is asking for a free lunch.

[bloodninja420]

  Should citizens pay all or most of what it takes to run, maintain, invest in and protect the country (since businesses benefit the public), or should businesses pay for all or part of that since they can't do business without live consumers, workers, roads, telecommunications, clean water, etc.

 

 

 

This question is illustrative of why public debate on the topic of corporate income tax is so sloppy and prone to demagoguery. The lay-public has trouble grasping the concept that there isn't some clean line between businesses on one hand and citizens on the other. The statutory incidence of a tax (e.g. laws stating that a c-corp pays a share of its income) is unrelated to the actual economic incidence of a tax (e.g. which group of individuals--consumers, employees, shareholders-- are actually paying the tax.)

 

Corporations are made up of one group of people (employees) that exist to serve another group of people (shareholders) by providing goods/services to another group of people (customers.)

 

It's people all the way down, and if you tax the corporate entity, it's really one of all of those 3 groups of people who are economically paying for that tax. A faceless entity cannot pay a tax, only people can. And by the way these people are already paying a plethora of taxes on wages, dividends, capital gains, consumption/sales.

 

I wish the public debate would reach the point of acknowledging this, because we can start asking actual interesting questions about efficient forms of taxation. Well, actually there is an entire and mature branch of Economics dedicated to studying this exact question. And the consensus is that a corporate income tax is one of the worst possible ways to raise revenue.

 

Because it brings in very little money while at the same time incentivizing very inefficient choices among actors in the economy. Our President and his council of ivy-league-educated economic advisers are all very well aware of this, but they have chosen instead to demagogue around talking points that play well among our less enlightened electorate.

[RCBS]

People are pissed, not because it's illogical or illegal, but because it's unfair.  They benefit from U.S. infrastructure but don't want to pay for it.

 

Companies now have the ability to discriminate based on religious grounds and contribute massive amounts of political money to super pacs with only the vaguest of disclosure.  They enjoy public infrastructure in ways that go far beyond an individual's, so why shouldn't they pay for the very environment that enables their profit?

 

It's easy to say that the U.S. has high corporate tax rates which are driving companies out of country.  But like you guys allude to re: tax code, tax attorneys and CPAs make careers out of exploiting loopholes (and lobbying for loophole existence), and that will only go away if we vastly simplify the tax code.  But good luck making that happen without the balance being tilted even more towards corporations with corporate tax attorneys and CPAs on the scene to craft the simplifications.  It's like letting bankers and ex-bankers craft financial regulations.

 

What I was trying to get across is that the Corpos get all the benefits and then some that I do because they are "persons".  39% is relative to what an actual citizen would pay to federal on standard income rate, no?  Maybe a bit lower.  If they want to be a "person" then they can pay a citizens tax share of their income.

 

That's pretty much how it was at the turn of the century, and exactly what we'll be closer to if tea-party Ayn Randian capitalism has its way.  If those elements keep pushing enough for it, I wouldn't be surprised at all with a Marxist/Socialist backlash in 50 years when society once again has enough of companies leaving wasted resources and sick people behind for our children to clean up.

 

Speaking of, pure Marxism and Socialism have been shown time and time again to be awesome ideas that don't work on their own.  Humans aren't evolved beyond self-interest, so successful economic policy needs to account for and harvest self-interest to motivate desired behaviors that benefit both individuals bearing risk for reward, and also shared public resources and interests.  One desired behavior, I would argue is NOT to create robber barons that refuse to pay for their use, maintenance and culture of a market's infrastructure and resources.

 

I really like TPoppa's post...

 

 

Because it unemotionally describes several of the key debates.  What is "fair share?"  Heck, is there even something called "public/common interest" that must be fairly shared (pure capitalists doubt there is)?  Should citizens pay all or most of what it takes to run, maintain, invest in and protect the country (since businesses benefit the public), or should businesses pay for all or part of that since they can't do business without live consumers, workers, roads, telecommunications, clean water, etc.

 

I don't think it's unreasonable at all to temper capitalism's "efficiency" and make players pay a tax for the environment they operate in.  We can disagree about the levels, but anyone who thinks government and the tax man should get out of the way is asking for a free lunch.

 

This is Thomas Paine territory.  What I got from Common Sense:  Persons or entities that "do well" in society can only do so because the society exists.  Therefore, the burden "owed" to the society that enabled their good fortune is proportionate to the amount earned.  Maybe I went full-tard and misinterpreted, but that's how I understood what he was writing about in regards to taxation and such.

 

[smccrory]

Clearly in any case you can tell its summer right now. Having this same discussion on Ohio Riders in the winter brings a wholly different tenor :-).

[Tpoppa]

If I could start over from scratch, I would have a 20-25% corporate tax rate with no further loopholes.   I would also want a team of union busters dressed as Imperial Storm Troopers. 

[Connie14]

Flat tax based on revenues for corporations and a flat tax based on personal income is as fair as it can get. One thing that gets lost in these debates is the ever increasing value of government expenditures. The expenditures should be capped to a % of GDP or current spending levels with an increase equal to inflation. With a fiscally responsible government, there is a deceased need for additional new taxes. The entitlements will also need to be addressed, as they are an ever increasing % of total government expenditures. Unless all of these items are addressed, they will make us a less competitive economy in the future.

[Tpoppa]

One thing that gets lost in these debates is the ever increasing value of government expenditures. The expenditures should be capped to a % of GDP or current spending levels with an increase equal to inflation. With a fiscally responsible government, there is a deceased need for additional new taxes. 

I just dropped my beer.

[magley64]

Economically challenged here...but aren't corporations treated as "people"? Why would they not be taxed as such? Certainly the earnings of this person would fall into the highest bracket.

Not in the tax code, lots of loopholes for corporations, capital gains are taxed lower than most middle class income.

[Tpoppa]

Not in the tax code, lots of loopholes for corporations, capital gains are taxed lower than most middle class income.

Not sure what you are trying to say here.  Capital gains for individuals are also taxed at a lower rate than income. 

[magley64]

Not sure what you are trying to say here. Capital gains for individuals are also taxed at a lower rate than income.

Right, but that's all the corporations income, none of their income are "wages" which are taxed at a much higher rate for "people".

It's probably the most shitty thing about our tax code, money earned by people is taxed higher than money earned by money.