The Accursed Inversion
Published in Le Devoir
(Canada) on 27 August 2014
by Serge Truffaut (link to original)
The American company Burger King, whose majority shareholder is a Brazilian investment fund, just purchased the Canadian business Tim Horton’s with the financial support of American businessman Warren Buffet. Why this stress on the nationalities involved? It shines light on a wound known as corporate inversion.
Yes, by buying a company that offers food products different from its own, Burger King intends to imitate the success of Yum Brands, the proprietor of various brands in the fast-food universe. Yes, Tim Horton’s should benefit from the effect of the leverage that comes with the geography of Burger King’s network. Yes, this union should allow Burger King to better resist the assaults of In-N-Out Burgers, Five Guys and Shake Shack when these companies enter the stock market. But all the same, to give assurances that this purchase was not made with an eye toward fiscal inversion is to take the great majority of citizens for a vast contingent of gullible people. We refuse to accept this.
In the United States, the fiscal protocols concocted by the authorities stipulate that the profits reported by a foreign company be subject to taxation when they are repatriated to the United States. And, as the hatred of the state is more pronounced than ever lately, American businesses have “stashed away” revenue totaling, according to the American Treasury, $2 trillion. At specific times, these businesses dip into this mass of cash untouched by taxes to buy companies that are foreign, or – more precisely – companies situated in countries where the taxation is the mirror of the scorn cultivated by a country for this sort of thing. Ireland is obviously the first to come to mind, where the rate in question is 12.5 percent. And this country, formerly the poorest in Europe, has had its economy brought up to European standards due to tax subsidization.
It remains that by moving Burger King’s head office to Ontario and fusing it with Tim Horton’s, the new entity will be taxed 26 percent, instead of the 35 percent tax imposed in the United States. I will note in passing that the most logical hypothesis, when addressing the circulation of capital monopolized by this transaction, is the following — it was outside the United States. What else? Since Buffett is the founder and manager of the investment fund Berkshire Hathaway, the dividends that he will receive will be taxed at 35 percent, and Buffett consolidated this variable into the total. In short, he negotiated and obtained an adjustment.
The agreement signed by the two companies confirms, distinctly and with brutality, that corporate inversion has now become a phenomenon with enormous social, economic and political fallout. So enormous, in fact, that only the very clever could detail all its vices at this time. Based on the cases recorded up to now — about 50 altogether, which is gigantic when you remember that we are talking about multinationals — the fiscal hemorrhage has reached $20 billion. According to certain projections, we can expect another $20 billion to escape the American Treasury.
Worried by the scale that this childish fiscal rat race has taken on since 2009, Barack Obama said these words: “I don’t care if it’s legal. It’s wrong.” It is wrong, and it is unbelievable social violence.
Yes, by buying a company that offers food products different from its own, Burger King intends to imitate the success of Yum Brands, the proprietor of various brands in the fast-food universe. Yes, Tim Horton’s should benefit from the effect of the leverage that comes with the geography of Burger King’s network. Yes, this union should allow Burger King to better resist the assaults of In-N-Out Burgers, Five Guys and Shake Shack when these companies enter the stock market. But all the same, to give assurances that this purchase was not made with an eye toward fiscal inversion is to take the great majority of citizens for a vast contingent of gullible people. We refuse to accept this.
In the United States, the fiscal protocols concocted by the authorities stipulate that the profits reported by a foreign company be subject to taxation when they are repatriated to the United States. And, as the hatred of the state is more pronounced than ever lately, American businesses have “stashed away” revenue totaling, according to the American Treasury, $2 trillion. At specific times, these businesses dip into this mass of cash untouched by taxes to buy companies that are foreign, or – more precisely – companies situated in countries where the taxation is the mirror of the scorn cultivated by a country for this sort of thing. Ireland is obviously the first to come to mind, where the rate in question is 12.5 percent. And this country, formerly the poorest in Europe, has had its economy brought up to European standards due to tax subsidization.
It remains that by moving Burger King’s head office to Ontario and fusing it with Tim Horton’s, the new entity will be taxed 26 percent, instead of the 35 percent tax imposed in the United States. I will note in passing that the most logical hypothesis, when addressing the circulation of capital monopolized by this transaction, is the following — it was outside the United States. What else? Since Buffett is the founder and manager of the investment fund Berkshire Hathaway, the dividends that he will receive will be taxed at 35 percent, and Buffett consolidated this variable into the total. In short, he negotiated and obtained an adjustment.
The agreement signed by the two companies confirms, distinctly and with brutality, that corporate inversion has now become a phenomenon with enormous social, economic and political fallout. So enormous, in fact, that only the very clever could detail all its vices at this time. Based on the cases recorded up to now — about 50 altogether, which is gigantic when you remember that we are talking about multinationals — the fiscal hemorrhage has reached $20 billion. According to certain projections, we can expect another $20 billion to escape the American Treasury.
Worried by the scale that this childish fiscal rat race has taken on since 2009, Barack Obama said these words: “I don’t care if it’s legal. It’s wrong.” It is wrong, and it is unbelievable social violence.
Next article![]( "Racism in Boxes")
