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Burger King And Tim Horton's Agree To Merge. The Consequences

Burger King logo This morning, several news sources reported that Burger King, the fast-food chain, and Tim Horton's restaurants have agreed to merge. Horton's is based in Canada. The merger allows Burger King to benefit from a tax inversion, where:

"The combined Canadian coffee chain and U.S. burger chain will have its global headquarters in Canada... In a tax inversion, two international companies merge and move their tax domicile to the lower tax country."

Last month, Bloomberg BusinessWeek published an interesting and informative analysis of the company, its young management, corporate history, and current marketplace challenges. You'll probably want to read the BusinessWeek report titled, "Burger King Is Run By Children."

Professor and former U.S. Labor Secretary Robert Reich posted on Facebook the following about the merger (links added):

"BK’s profits have been flat, mainly because its mostly lower-income customers don’t have enough money to boost sales. So the pending deal is welcome news to investors, who today sent its stock up nearly 20 percent. But it’s a lousy deal for you and me and other Americans because we’ll have to make up for the taxes Burger King stops paying. We’re already subsidizing Burger King because it refuses to raise the pay of its frontline workers, who are now at or near the minimum wage. So we're paying for the food stamps, Medicaid, and wage subsidies its workers need in order to stay out of poverty. That means when BK deserts America to cut its tax bill, we’ll be paying twice. That's a whopper of a slap at America."

A whopper of a slap, indeed. Mr. Reich posted in an update (link added):

"It’s one thing when a company the Pfizer flirts with corporation desertion (technically, a tax “inversion”) to become a foreign company and lower its tax bill. But Burger King, like Walgreen, is highly visible to consumers. Walgreen dropped its plan to desert the United States after a customer backlash and bad publicity. So a boycott of Burger King, accompanied by letters to the local press, picketing for the broadcast media, and a general ruckus, should be helpful."

The phrase "tax inverson" sounds clinical and almost meaningless. I like and prefer the phrase, "corporate desertion" since it better describes what is really happening. And, a boycott seems the appropriate consequence for the burger chain's actions.

What are your opinions of Burger King's tax inversion? Of the "corporate desertion" phrase? Of a boycott?

Comments

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Chanson de Roland

I wish that I did patronize Burger King so that I could boycott it, but I don't, because I never could stomach that sauce on its burgers, which always makes me sick.

I am in accord with the editor, Mr. Jenkins, that inversion is too clinical a term which hides what Burger King is doing, which is being a tax cheat, though their inversion seems legal. So if Burger King wants to pay only a foreigner's taxes and thus leave the rest of us to make up the difference and pay for their workers’ social benefits, let's boycott it and try to prevent the merger or, failing that, inflict such damage to Burger King's revenues as to force it back to the U.S. or force it into other U.S. hands.

And let's call Burger King and other U.S. companies, which use inversion to unfairly avoid paying the already ridiculously low corporate taxes, what they are: Tax cheats.

And why isn't Congress fixing this. The U.S. Congress should close this grossly unfair loophole. These firms enjoy all of the benefits and protections of the United States, but then do an inversion so that they don't have to pay their otherwise legally mandate U.S. taxes, and, after the inversion, will still enjoy most of the rights and privileges that they would have had as American firms. Congress can and should fix this so that a firm pays according to where its assets are located and its revenues are earned. Or is this another instance where Congressional Republicans and perhaps Democrats refuse to close loopholes in corporate taxation, even where, as here, the loophole allow firms to enjoy the benefits of America, while paying the taxes of a foreign firm?

Where are now the deficit-hawk Republicans to oppose this deficit increasing loophole of inversion? Or do Republicans only reduce the deficit on the backs of poor and middle class Americans by taking the benefits of their social safety net (e.g. Medicare, Medicaid, school grants and loans, welfare, food stamps, etc.), while leaving the corporate social safety net not only untouched but expanded.

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