8 ms·

The real story here is in the nature of the acquisition, a so-called "inversion" that will create a combined Canadian, rather than American, company, which is l

The real story here is in the nature of the acquisition, a so-called "inversion" that will create a combined Canadian, rather than American, company, which is likely to substantially reduce Burger King's corporate tax liability.

fddr 12y ago
This is not entirely correct. The reduction in tax liabilities will be much smaller than you might expect and this is not a merger motivated purely by that. For an in depth discussion see [1]. [1] http://www.bloombergview.com/articles/2014-08-25/burger-king-may-move-to-canada-for-the-donuts http://www.bloombergview.com/articles/2014-08-25/burger-king....
- araes 12y ago
  Very interesting read, and thanks for the link. Had no idea that the King had fallen on such hard times (or maybe that Tim was comparatively doing so well) Almost double the owned assets ($1.5 B vs $0.8 B) and nearly triple the total revenue ($3.0 B vs $1.1 B). The King may be valued higher for its IP, but it appears like Tim is running a significantly better core business. Admittedly, Tim is basically a monopoly in its home market. At best, this looks like a merger of equals, rather than an inversion; if not a big, but unknown, player buying a weak, but well known, competitor in a new market. Very similar tact as many foreign companies (UK, Japan, German, Chinese) have done in other sectors like tech (doubled from 1996-2005). [1] http://www.reuters.com/article/2008/08/27/us-companies-ownership-usa-idUSN2744743020080827 http://www.reuters.com/article/2008/08/27/us-companies-owner...
- apendleton 12y ago
  Right, I don't think that's the only motivation, but it seems like it's at least part of it. If I read that article correctly, almost half of Burger King's locations are outside the US and Canada, and the revenue all of those locations, as well as the Canadian ones (however many of those there are) should see a reduction in tax liability; further, that slice of the pie is growing, as Burger King's US presence is shrinking while its foreign presence is growing.
bryanlarsen 12y ago
9 billion dollar companies do not spend 11 billion dollars just to save a few dollars on taxes.
Alupis 12y ago
So? -- Seems like a smart business move, if that is really the case. I'm getting tired of people trying to name-n-shame companies that are leaving the US in favor of substantially better tax laws. Instead of groaning and trying to patronize these companies with some sort of nationalist pride, how about we do something about the damn tax laws that are making companies want to leave in the first place.
- sgift 12y ago
  Sure, because a race to the bottom (the best tax rate from a companys perspective? 0%) is exactly what the world needs. I've never understood why companies should only be liable to taxes in the country they are incorporated in. You do business here? Then you pay tax here. Should be easy to fix. Somehow it isn't.
  - DSMan195276 12y ago
    While I agree with you, on the flip side the alternative is that they don't sell their goods here, and people wouldn't be very happy about that. You have to draw a line somewhere to decide what's a reasonable price/tax/etc. for everybody, but it's not really an easy thing to do.
    - roc 12y ago
      > "the flip side the alternative is that they don't sell their goods here" That's a silly concern. Businesses do not forgo profit simply because they'd prefer if there were more. They always prefer if there were more. And yet they still seek the profit that's available. So long as cost/benefit suggests the US is a profitable market, they will continue to sell their goods here. The only "risk" of corporations "taking their ball and going home", is if the United States pursued a transparently self-destructive tax rate on foreign-based corporations. Which there is absolutely no reason to expect would even enter rational conversation. Imagine a husband and wife are talking about what car they should buy next and they disagree on the budget. The analogous case to a tax rate so high corporations leave the US market, is the husband deciding to burn the house down so that there's no garage and no money at all. While that's certainly a possible alternative to negotiating their differences, discussing that alternative is, at best, silly. And attempting to ascribe serious weight to the possibility is downright intellectually dishonest.

fddr 12y ago

This is not entirely correct. The reduction in tax liabilities will be much smaller than you might expect and this is not a merger motivated purely by that. For an in depth discussion see [1]. [1] http://www.bloombergview.com/articles/2014-08-25/burger-king-may-move-to-canada-for-the-donuts http://www.bloombergview.com/articles/2014-08-25/burger-king....

araes 12y ago
Very interesting read, and thanks for the link. Had no idea that the King had fallen on such hard times (or maybe that Tim was comparatively doing so well) Almost double the owned assets ($1.5 B vs $0.8 B) and nearly triple the total revenue ($3.0 B vs $1.1 B). The King may be valued higher for its IP, but it appears like Tim is running a significantly better core business. Admittedly, Tim is basically a monopoly in its home market. At best, this looks like a merger of equals, rather than an inversion; if not a big, but unknown, player buying a weak, but well known, competitor in a new market. Very similar tact as many foreign companies (UK, Japan, German, Chinese) have done in other sectors like tech (doubled from 1996-2005). [1] http://www.reuters.com/article/2008/08/27/us-companies-ownership-usa-idUSN2744743020080827 http://www.reuters.com/article/2008/08/27/us-companies-owner...
apendleton 12y ago
Right, I don't think that's the only motivation, but it seems like it's at least part of it. If I read that article correctly, almost half of Burger King's locations are outside the US and Canada, and the revenue all of those locations, as well as the Canadian ones (however many of those there are) should see a reduction in tax liability; further, that slice of the pie is growing, as Burger King's US presence is shrinking while its foreign presence is growing.

bryanlarsen 12y ago

9 billion dollar companies do not spend 11 billion dollars just to save a few dollars on taxes.

Alupis 12y ago

So? -- Seems like a smart business move, if that is really the case. I'm getting tired of people trying to name-n-shame companies that are leaving the US in favor of substantially better tax laws. Instead of groaning and trying to patronize these companies with some sort of nationalist pride, how about we do something about the damn tax laws that are making companies want to leave in the first place.

sgift 12y ago
Sure, because a race to the bottom (the best tax rate from a companys perspective? 0%) is exactly what the world needs. I've never understood why companies should only be liable to taxes in the country they are incorporated in. You do business here? Then you pay tax here. Should be easy to fix. Somehow it isn't.
- DSMan195276 12y ago
  While I agree with you, on the flip side the alternative is that they don't sell their goods here, and people wouldn't be very happy about that. You have to draw a line somewhere to decide what's a reasonable price/tax/etc. for everybody, but it's not really an easy thing to do.
  - roc 12y ago
    > "the flip side the alternative is that they don't sell their goods here" That's a silly concern. Businesses do not forgo profit simply because they'd prefer if there were more. They always prefer if there were more. And yet they still seek the profit that's available. So long as cost/benefit suggests the US is a profitable market, they will continue to sell their goods here. The only "risk" of corporations "taking their ball and going home", is if the United States pursued a transparently self-destructive tax rate on foreign-based corporations. Which there is absolutely no reason to expect would even enter rational conversation. Imagine a husband and wife are talking about what car they should buy next and they disagree on the budget. The analogous case to a tax rate so high corporations leave the US market, is the husband deciding to burn the house down so that there's no garage and no money at all. While that's certainly a possible alternative to negotiating their differences, discussing that alternative is, at best, silly. And attempting to ascribe serious weight to the possibility is downright intellectually dishonest.