The jury is out as to how much of the Burger King-Tim Horton merger is driven by the desire for tax savings. So far, the range seems to be modestly to not very much. The Los Angeles Times noted “Burger King’s overall effective tax rate in 2013 was 27.5%, according to its annual report. Tim Hortons’ effective tax rate for the same year was 26.8%.” That hardly seems motivation for a deal valued at almost $12 billion. More likely, creating a competitor to fast food’s No. 1, McDonald’s, was the driving force. The merger creates the world’s third-largest fast-food company.

Before we proceed, you might want to get a better understanding of the details of this transaction: Read my colleague Matt Levine’s excellent Warren Buffett Funds Global Donut-Burger Behemoth; for a good history of tax inversions, see this quick take.

As we have discussed, I find corporate inversions to be rather distasteful, and suggested several simple steps to make them less desirable to corporate America.

Continues here




Category: Corporate Management, Legal, Taxes and Policy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

7 Responses to “Warren Buffett’s Attackers Are Hypocritical”

  1. spencer says:

    What are all the drug company CEOs telling us about the long run prospects for their firms if they feel they need to resort to these unusual tax avoidance measures?

    I suspect it signals that they are not very optimistic about their companies long run prospects.

  2. Whammer says:

    Good argument Barry. I find it remarkable that educated people think they have some kind of excellent “gotcha” argument re Buffett and his arguments that tax rates on the very wealthy should be higher.

  3. VennData says:

    Beautiful issue for the Democrats.

    The Reagan era law making inversions legal is ridiculous. It is funny to watch these bloviating right wingers say how patriotic this is.

    What about America, Love it ir Leave it?

  4. ToddMPeters says:

    If BKW leaves their headquarters in Miami I can be convinced the merger is for strategic business reasons. The proposed move to Ontario, and the timing, at minimum raise the appearance that this is being done for tax reasons.

  5. formerlawyer says:

    I am not familiar with tax law, let alone fancy tax avoidance structures, but if I recall correctly Burger King’s operates on a franchise model. In that case, once moved to Canada would not franchise royalties by US franchisees be considered as being earned in Canada?


    ADMIN: Only if the franchises are physically in Canada

  6. Scott Frew says:

    Admin, your response to formerlawyer is only partially correct, and I think what it fails to include is critical to analyzing the tax effects of the inversion here. You’re right in your implicit statement that royalties earned on franchises located in the U.S. would be taxed at U.S. rates. But virtually all the growth in BK franchises is coming from outside the U.S. Thus the vast majority of the earnings growth is coming outside the U.S. HQed in Miami, that all gets taxed at U.S. rates. After the inversion, all of that non-U.S. growth gets taxed at much lower rates. Matty L’s article is a good one, I thought, but he seemed to miss that.