In a move that has President Obama considering ways around congress again, and some congress critters outraged, Burger King is in talks to buy the Canadian version of Starbucks, Tim Hortons. Which would allow them to move their corporate headquarters to Canada and get out from under the US corporate tax rate of 35%. Canada’s corporate tax rate is a shade less than half the US, at 15%.
“Treasury Secretary Jacob J. Lew recently said that the White House was weighing whether to take a harder line on inversions and that it had already identified potential ways in which it could block the corporate tax flight without having to rely on Congress to pass legislation.”
Thus once again bypassing Congress and the Constitution. Why am I so not surprised by this? Easy..I don’t trust my own government any farther than I can throw it.
Why is the federal government considering taking such a “hard line” in this case? The answer is in the article.
“Though most of the companies that have used inversions are big drug makers like AbbVie, which makes the arthritis drug Humira but isn’t a household name, Burger King would be one that is highly visible to consumers.”
Yep unlike the pharma companies , BK is a well known name ; and it’s leaving would make America in general and the US government specifically…look BAD to the American people. Of course that BAD would be interpreted differently by the different spectrums of the political “will” of the people. On the left, the progressives, the liberals, the democrats…it would be perceived as Congress letting yet another EEEEBIL corporation escape paying “their fair share” and funding the ever increasing size of the welfare state.
Or as another article put it..”Meanwhile, the news gives Democrats another talking point. The potential departure of an iconic American company because of “corporate greed” will be trotted out on the campaign trail.”
“Burger King already pays a tax rate of roughly 27 percent, and would shave off only a couple of percentage points by moving to Canada, according to the people briefed on the matter.”
12 percentage points is a”FEW”? Well I suppose so in that it’s only 12 percentage points. However with the amounts of money we’re talking about here that’s a good sized chunk. Let me put it this way. BK’s first quarter net income for this year was nearly double what it was in 2013. By the same token, their revenue intake for the same quarter was DOWN this years first quarter to the tune of 90million dollars. (iow that’s how much their revenue is down BY, not down TO) Their 2nd quarter shows a similar trend., if not nearly as large. Burger King and other companies are on a roller coaster. Because if you look at 3rd quarter 2013 vs 3rd quarter 2012…their revenues in 2013 were down by HALF. vs what they were in 2012. How have they been cutting costs? Well for one thing, I don’t know about the rest of you but it seems like they’ve cut down the menus[depending on location] to just basics, burgers, fries, drinks and smoothies/shakes/icees. They’ve taken out the salads. They’ve gotten rid of the satisfries. The latter of which makes this bloggers mother unhappy, because satisfries were the only way guaranteed to get fries fresh out of the fryer, as opposed to fries that had been sitting under the heat lamp for a while. Plus she just sometimes preferred the salads. The other side of the equation being they spent a ton of money on refits/facelifts for the older stores. So that may explain the loss that first quarter.
Something else to think about. Burger King, their locations…are all, or rather just shy of all [by a margin of ohhh..50 stores or so according to their own website] franchisee ‘owned’ and run. Therefore the franchisees in America are going to, as far as I can tell, going to get the short end of the stick. As is usual for small business owners it seems. In that while corporate will move and cut it’s corporate tax rates; that will still leave the franchisees paying federal, state and local taxes. Along with all the rest of the overhead involved in running a business. Which is just truly stupid in some places.
So this deal and the reaction to it are “food for thought”, if you’ll pardon the pun