A Taxing Problem

Also remember last year when Burger King, financed in part by Warren Buffett, said that its deal to buy donut-chain Tim Hortons and relocate to Canada wasn’t driven by lower taxes? Senate investigators, drawing on internal Burger King documents, report that while the merger was motivated by business considerations, the decision on where to locate the combined company’s headquarters had a lot to do with minimizing future tax bills. 

“Burger King calculated that pulling Tim Hortons into the worldwide U.S. tax net, rather than relocating to Canada, would destroy up to $5.5 billion in value over just five years,” according to the report. The company says that was merely a rough estimate, but that’s still enough to deter management from subjecting Hortons’s non-U.S. income to the U.S. tax code. 

Shareholders deserve nothing less from management than the Warren Buffett approach of paying the lowest possible legal tax rate. And shareholders demand it, which absent American tax reform will end up pushing more U.S. companies into foreign hands. 

[...] 

The ultimate losers in all of this aren’t so much the owners as American workers, who often lose their jobs when a company moves abroad. Sometimes layoffs are necessary, no matter who’s in charge. But job losses are greater when the company is run—not by the most competent manager—but by the one most able to exploit a government-created advantage. It’s well past time for our government to stop creating advantages for foreign competitors.

The Wall Street Journal. "Abetting a Foreign Takeover" Wednesday, August 5, 2015, Accessed on August 5, 2015, http://www.wsj.com/articles/abetting-foreign-takeovers-1438732072