According to the Associated Press yesterday, "Burger King is in talks to buy doughnut chain Tim Hortons and create a new holding company headquartered in Canada, a move that could shave its tax bill."
Known as a "tax inversion," such mergers have been popular recently among US companies looking to move their headquarters and place of incorporation offshore to minimize their US tax bill. US pharmaceutical companies have taken the lead in this aggressive tax planning move by announcing hundreds of billions of deals recently.
The move caught US legislators flat footed, mostly because most large US companies already pay very low corporate taxes and these same congressmen feed daily at the trough of corporate campaign and lobbying contributions. While claiming allowances for taxes for accounting purposes in their financial reports north of 30%, many Fortune 500 companies end up paying little to no real corporate tax at all on their tax books. Large international firms like Burger King leave trillions of dollars of profits parked offshore permanently to avoid paying any US taxes.
Stocks of both companies jumped 17% on the news, but Burger King and their majority owner, 3G Capital, may have erred in this short-sighted attempt at maximizing shareholder value by trying to minimize their US tax bill.
Unlike customers of a pharmaceutical company that may be tied to daily consumption of a life-saving pill, customers at Burger King have no such life-threatening loyalty to the company. If they choose, they can get their junk food fix at any number of competing fast food establishments.
Why should we boycott Burger King just because they are avoiding their US tax responsibilities? Because if they don't pay their fair share of US taxes, someone else has to, and that someone is you. Total government spending is not going to change because Burger King moves offshore, only the tax burden will shift to others, namely you.
Make no mistake, Burger King is still going to use the services of the US government, they just aren't going to pay for them. Their delivery trucks will still run on our aging highway system. Their shipments will still arrive at our ports. Their products and sourcing of food staples overseas will still be inspected by the FDA. Their facilities worldwide will still be protected from expropriation by our court system and defense establishment. Their brands and logos will be protected by our intellectual property rights. Most importantly, many of their low-wage part-time and full-time workers will still avail themselves of our government's health care system and our government provided retirement system. Many of their employees I am sure avail themselves of other low income government services like food stamps, but I am quite sure Burger King will not release any data on that topic.
You may think that boycotting Burger King and stopping this merger won't make a big difference in the scheme of things given all the much bigger problems we face in the world today. But, if we can show that consumer boycotts are effective, then maybe they will become the weapon of choice to punish other corporate free-riders who are polluting our air, wasting unneeded tax subsidies and other corporate welfare dollars, avoiding their taxes and harming our children and our citizens through their effective lobbying of our elected representatives.
Remember, corporations and banks rule the world, but their power ultimately comes from us, the consumer, who buys their products and services. They would have no profits and their executives would have no bonuses if we chose to shop elsewhere. We have the power to stop their illicit behavior as soon as we decide collectively that we want to.
John R. Talbott is a bestselling author and finance professor whose books predicted the housing crash, the banking crisis and the global economic collapse. You can read more about his books and the accuracy of his predictions at www.stopthelying.com John can be reached at email@example.com