Some Senate Democrats are seizing on Burger King’s Canadian doughnut chain Tim Horton’s to renew their calls for Congress to ban corporate inversions.
The merger will involve relocating the company’s headquarters to Canada, meaning it will not have to pay U.S. taxes on its foreign earnings.
“Congress can’t afford to wait any longer to put a stop to tax dodging through this kind of merger,” Michigan Democratic Sen. Carl Levin said in a press release on his website. Levin also predicted “a strong public reaction against Burger King that could more than offset any tax benefit it receives.” (RELATED: Democrats Want to Deny Federal Contracts to Companies That Relocate Overseas)
Ohio Democratic Sen. Sherrod Brown accused Burger King of ducking its responsibility to help pay for the public infrastructure that allowed it to succeed, and encouraged consumers to abandon Burger King in favor of Wendy’s or White Castle, “two Ohio companies that haven’t abandoned their country.”
Brown also proposed “a long term solution that lowers corporate tax rates while instituting a country-by-country global minimum tax,” an approach that blends elements of proposals from both parties.
Republicans have argued that corporate inversions are a natural response to high corporate tax rate, so Brown’s plan calls for making the tax code “competitive with the average of countries that are part of the Organization for Economic Co-operation and Development (OECD).”
At the same time, Brown’s global minimum tax rate seems designed to appease Democrats, since it could potentially involve raising taxes on companies that are located in low-tax countries. Although he did not give details about how a global minimum tax could be created, Brown said it would involve “establishing a flat minimum rate that companies pay in each country in which they do business.”
However, executives at Burger King argue that the move is not motivated by taxes, but rather is an acknowledgement of the primary role that Tim Horton’s will play in the combined company.
“This is not a tax-driven deal,” Burger King executive chairman Alex Behring told the Los Angeles Times. In a conference call with reporters, CEO Daniel Schwartz added, “We don’t expect there to be meaningful tax savings,” from the move.
Warren Buffett, the billionaire investor who famously asked the government to raise taxes on the rich, is helping to finance the merger. (RELATED: Warren Bufett Bucks Democrats In Burger King Bid)
Although Buffett has long been considered an ally of the Obama administration, his involvement in the Burger King deal puts him at odds with the White House, which has labeled companies that relocate overseas for tax purposes “unpatriotic” and “corporate deserters.” (RELATED: US Tax Code Causes Businesses to Flee Overseas)
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