The King and the Hockey Star

Tim-Hortons

I think it is about growth, but I think it also is about taxes. Burger King is so visible, it puts the focus on the general behavior of corporate America and, in a sense, the contempt that they feel for the average American, and in fact, the United States of America. — Sen. Bernie Sanders

Is the merger between Tim Hortons and Burger King about taxes or not. One wonders; opinions vary widely.

  • Sen. Bernie Sanders believes it is about growth, but also about taxes,”
  • Vauhini Vara, writing for The New Yorker, notes–In 2011, after 3G Capital acquired Burger King, the new owners set out to attract more customers by making the restaurant’s menu more diverse and opening more franchises abroad. To cut costs, the company offloaded restaurants that it had owned onto franchisees. The plan worked.

    PHOTOGRAPH BY RICHARD DREW/AP

  • Venessa Wong, writing for Business Week, writes–Unlike Burger King, which relies on franchise royalties and fees and real estate for 80.6 percent of its revenue, Tim Hortons has another important source of revenue: distribution sales. These are sales of products, supplies, and restaurant equipment shipped directly from the company’s warehouses or by third-party distributors to restaurants. 
  • Jeff Stein, writing for The Ithaca Voice, says it isn’t about taxes and quotes Alex Behring, Burger King’s chairman, to prove his point.
  • Amy Miller, writing for Legal Insurrection, quotes Burger King CEO Daniel Schwartz and claims that it is about corporate profits from an “incredibly successful, lucrative corporate brand.” What could be wrong with that?

Martha Robertson reportedly said: “…Burger King is an American company, and it’s downright unpatriotic for them to abandon the country that allowed them to succeed in the first place.” Rep. Tom Reed, Martha’s rival, has so far, perhaps wisely, had no comment.

© William Hungerford – August 2014

http://www.huffingtonpost.com/2014/08/25/bernie-sanders-burger-king-tax_n_5711085.html/

http://www.businessweek.com/articles/2014-08-27/tim-hortons-has-higher-revenue-than-burger-king/

http://www.newyorker.com/business/currency/burger-kings-un-canadian-plans-tim-hortons/

http://ithacavoice.com/2014/08/local-congressional-candidate-denounces-burger-king-unpatriotic-decision/

http://legalinsurrection.com/2014/08/burger-king-merges-with-tim-hortons-left-has-a-meltdown/

 

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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16 Responses to The King and the Hockey Star

  1. pystew says:

    It doesn’t matter what their stated reason was, the results are the same: they are benefiting from operating in the United States and paying taxes to Canada. It is wrong. Most Burger Kings I know are near other hamburger/fast food joints. I will just go to Wendy’s and enjoy their Pretzel Bun Burger instead of the Whopper.

  2. josephurban says:

    Corporations have no “loyalty” to anything except the bottom line. What does it matter if a corporation is owned by Americans or Chinese or Dutch ? How many “American Company” products are now made in China (Brand name golf clubs, for example)? I drive a Korean company automobile (Hyundai)…made in Alabama. As far as fast food and discount stores are concerned (like WalMart) , the US taxpayer is already subsidizing the work forces which are grossly underpaid. I don’t care who owns them, but they should all be required to pay a living wage to their adult employees.

  3. whungerford says:

    We often are told that corporations have no interest other than profit, but is it a universal truth? What about employee owned or family owned corporations? Does Mitsubishi have no loyalty to Japan? Why does Koch Industries spend recklessly to overthrow democracy; is the only motive profit? If a corporation achieves a monopoly, does the relentless drive for profit continue or might it turn to other goals?

  4. josephurban says:

    Is profit the motive for corporations? The legitimate goal of every corporation is to maximize profit. That is not a criticism, it is what a corporation should do. If, as a sidelight, a corporation decides to be a “good citizen” that is nice, but that is not a corporate goal.
    Are corporations “loyal” to their countries? Mitsubishi, for example, has been making cars in the USA since the 1980s. It moved some of it’s manufacturing to the US to make a greater profit. Not loyal to Japan. Nor should it be. I would guess that almost all major corporations are now “multi-national”. No loyalty.
    Why does Koch spend money trying to influence democracy? Koch brothers have wisely (in terms of their corporate interests) spent millions supporting congressmen who accept their version of the law. As you probably know, the American Legislative Executive Council (ALEC) has been giving congressmen pre-written laws for the last 40 years. Anti-tax, anti-social, anti-regulation, pro-business laws. For the Kochs it has been a great investment. They don’t need to overthrow democracy, they simply bought it.
    If they succeed do corporations turn to other goals? Well, if we look at the last 40 years have successful corporations turned around and shared their wealth ? Or have they continued to swallow up smaller companies? Do they not expand into to areas once they have monopolized an industry? Isn’t there a constant urge to grow and merge? Isn’t the ultimate goal to become too big to fail?

  5. Deb Meeker says:

    Well explained.
    Corporations have done this for many years. Move to where labor is cheap, and products are still less expensive to make, thus allowing much higher profits; and once that country begins to accelerate it’s wage increases, just move to another country that hasn’t yet evolved.
    It would seem if one follows the logic to a conclusion, one ultimate goal for corporate owners with no particular national loyalty might be – once ownership of the economy is established, corporate owners can begin applying their vision for the type of religion, and/or moral codes they see fit. The Green family owner of Hobby Lobby is a case in point.

    http://www.forbes.com/profile/david-green/

  6. whungerford says:

    The standard model is that business must maximize profit or fail. There is surely truth to this, but there is more to the story. Unless the business environment is “anything goes,” there are constraints. Tobacco companies would have reacted differently to the cancer threat if the government had aided them in deceiving the public. Mitsubishi might not manufacture here if there were no “domestic content” laws. Koch might alter its investments if the impact of climate change were assessed differently.

    BK, failing, turned to franchising, overseas markets, and now acquisitions. This may be the best course or not; it isn’t the only course. BK could have chosen to invest in new products or improved services for example.

    Corporations do invest in “goodwill,” even lacking solid evidence of the value of these investments. They may invest in an art museum, a little league team, or a politician, without expectation of a measurable impact, if any, on the bottom line.

  7. Anne says:

    You’d think that Tom, sitting as he does on Ways and Means, would have plenty to say about this. But I guess you’d think wrong.

  8. josephurban says:

    You make a good point. The examples you refer to are government regulations, however, not corporate desires. Which is why we need strong regulations to begin with. Corporations make a profit, government sensibly regulates corporate activity. (In theory). Regarding corporate “good will”. Do you not think there are massive tax write-offs for these public works?

  9. whungerford says:

    “Alcoa gave the biggest share of its profits in cash to charity (6.2 percent), followed by Merck & Company (4.2 percent). But most companies donated far less: The median was 1 percent.”
    http://philanthropy.com/article/Big-Companies-Gave-4-More/133073/

  10. whungerford says:

    I agree with Martha: corporations have an obligation to their customers, their employees, and their country of origin even if it reduces profit. Corporations do claim to be public-spirited and do spend on philanthropy. Lefties like to disparage corporations as overly profit-hungry seeing that as wrong. Some on the right agree that corporations focus only on profit thinking that is as it ought to be.

  11. josephurban says:

    When we talk about corporate “giving” keep in mind that this giving is tax deductible …anywhere from 20-50%. Corporations are not, and should not, be in the business of charity. They are formed to make money. And that is a good thing. However, the tax code has been written in such a way that while the corporate tax rate on paper is 35%, while in fact the average corporation pays less than 15%. In 2011, for example, on profits of 1.3 trillion dollars, US corporations were taxed for 350 billion dollars. However, AFTER “tax credits”, this actual tax figure drops to 221 billion dollars. (Source: IRS Publication, Corporate Income Tax Returns, Tax Year 2011) And ,as we know, many pay no taxes, using the various loopholes available to them. (Reuters, “30 Companies Paid no Taxes from 2008-2010”, Reuters, November 3, 2011)
    I don’t fault corporate tax experts for taking advantage of the system. I fault Congress and the POTUS for not addressing the problem.
    A second point. When a corporate executive or board decides to “give” money or services to some tax exempt group it is taking taxes out of the system. Instead of the government providing the needed services, it is at the discretion of individuals as to who will benefit. What do you think? Is it more likely for a CEO to choose his alma mater for a gift or the local community college? This becomes, in essence, a transfer of tax dollars to organizations chosen by corporate executives. I would rather see the loopholes closed and eliminate all deductions for charitable contributions. If it really IS charity, you don’t need a deduction, do you ?

    I

  12. whungerford says:

    We often see proposals for lower corporate taxes in exchange for closing loopholes; I have no confidence that loopholes would be closed. Let’s close those loopholes first.

    As for tax deductions for charitable contributions, individual and corporate, I am torn. Disallowing deductions seems fair, but it might harm organizations I support. I would like to be sure that my taxes would go down enough that I could make up the difference in my contributions.

    Tom Reed is big on encouraging private giving with tax deductions–perhaps that ought to make us suspicious. The idea that private charity could replace the social safety net is blatant nonsense.

  13. whungerford says:

    Reed on Burger King:
    The recent push by Burger King to buy Tim Horton’s and move the combined headquarters to Canada to escape higher U.S. taxes is another example of the need to change the U.S. tax code, Rep. Reed said. The last major change was in 1986. The current tax code is “creating a perverse incentive (for companies) to go overseas,” he said. “We should get together and fix the tax code.” He is a member of the tax-writing Ways and Means Committee.
    Rep. Reed said he favored the approach Way and Means Committee Chairman David Camp proposed earlier this year on changes in the tax code that would have netted the average Southern Tier resident $600 a year.
    Could the Burger King acquisition of Tim Horton’s be a catalyst for a change in the tax code?
    “It could,” he said. He said it’s not a question of U.S. companies’ “patriotism,” as President Barack Obama asserted last week, but “a question of survivability.”

    Here Tom blithely assumes the move was prompted by tax savings; he makes no attempt to justify that assumption.
    http://www.salamancapress.com/news/article_d61e0888-2f83-11e4-93d3-0019bb2963f4.html

  14. Anne says:

    There’s that magical $600 figure again….is he still talking about what he thinks everyone is paying an accountant to do their taxes for them?

  15. whungerford says:

    Tom is like a magician with a handkerchief–while his constituents are distracted by the offer of $600 savings, he would “reform” the tax code. This plan may remind one of GWB’s plan to “refund” the Clinton tax surplus.

  16. Anne says:

    Yes, I still remember my $300 check from the Bush tax cuts.

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