This blog is adapted from my ABCNews.com daily business blog
Burger King is facing a grilling from critics of U.S. companies that move overseas to cut their tax bills.
“I’ve eaten my last Whopper,” is among the many angry comments on Burger King’s Facebook page. That one received more than 1,000 “likes” at the company’s social media site.
BK announced on Tuesday that it would buy the popular Canadian coffee and doughnut chain Tim Hortons for more than $11 billion, and move the corporate headquarters of the combined firm to Canada, where corporate tax rates are lower than in the U.S.
Liberal Sen. Sherrod Brown, D-Ohio, wants U.S. consumers to spend their burger dollars elsewhere .
Other Senate Democrats are calling for legislation to limit tax inversions by American companies that takeover foreign firms largely for fiscal reasons.
But the CEO of Burger King insists the deal is not about taxes. And there appear to be strong competitive reasons for this move.
While the fast-food giant is much better known and has many more franchises, Tim Hortons is the most profitable of the two. The merger could also heat up the company’s share of the fast-growing breakfast market and create the world’s third largest fast-food chain.
And besides, say BK boosters, why shouldn’t a firm look after the best interests of shareholders by lowering its tax burden?
Perhaps the move will also re-start the stalled debate over complex U.S. corporate taxes.
This is not merely about high American rates, with loopholes and write-offs for some businesses but not others. The controversy also involves global taxes.
“The U.S., unlike most developed-world governments, insists on taxing the global income of its citizens and corporations that have U.S. headquarters,” writes Megan McArdle of Bloomberg Businessweek. “Because the U.S. has some of the highest tax rates in the world, especially on corporate income, this amounts to demanding that everyone who got their start here owes us taxes, forever, on anything they earn abroad.”
Critics of these rules say the system is to blame for billions of dollars being parked off-shore by subsidiaries of U.S. firms.
The argument, they insist, is about more than businesses paying their fair share. It also involves Congress and whether it will act to reform the corporate tax code.