Editor's Plate: Another Tax Inversion?

Sept. 1, 2014
Now Burger King wants to dodge U.S. taxes by acquiring Tim Hortons.

Two months ago I railed about Walgreen Co. considering a dodge of U.S. business taxes because of a foreign acquisition. I guess it’s only fair I set that record straight and put Burger King on the grill now.

Despite its acquisition of Switzerland-based drug store chain Alliance Boots, Walgreen Co. decided not to go through with a tax inversion. The biggest U.S. drug store chain, which sells a lot of groceries, decided it would not call a small office in the Alps its nominal worldwide headquarters; and, in the process, pay substantially lower Swiss taxes. The company, which has thousands of stores in all 50 states, received a lot of critical press, and not just in its hometown Chicago.

I quoted a values and vision statement attributed to the founder, and asked if Charles Walgreen would do such a thing. Admittedly, taxes are lower in many other countries. But America has been very good to Walgreen’s; Walgreen’s should return the favor.

I got four emails about that column, three in agreement with me and one chiding me for not understanding the big picture and that it’s things like the high corporate tax rate that are ruining business in this country.

In late August, Burger King Worldwide announced a deal to acquire the Canadian coffee-and-donut chain Tim Hortons (actually, Hortons claims to be a “multinational fast-casual restaurant chain”) in a cash and stock deal worth about

$11.5 billion. Call it a merger if you want – as they do – but Burger King and its investors are clearly the ones doing the buying.

One of the side benefits will be to locate the new headquarters in Canada, where corporate taxes are lower than those in the U.S. Another tax inversion.

Burger King is not as red-blooded American as Walgreen’s. 3G Capital Management, its majority stake holder, is an investment firm that grew out of Brazil, but Warren Buffett, the Oracle of Omaha and a guy who talks a good corporate responsibility game, holds a significant stake. Buffett and his investment firm Berkshire Hathaway reportedly are providing a quarter of the funding (I saw $3 billion in one report) by taking preferred stock in the combined company.

I gotta be careful what I say, because I don’t want those parties taking anything out on H.J. Heinz Co., a favorite of mine, which 3G Capital and Berkshire Hathaway acquired last year.

Unlike Walgreen’s, I can find no incriminating or ironic statements on the Burger King website or in its corporate responsibility report. Although Burger King is international in scope, I’m sure more Whoppers are consumed here in the U.S. than anywhere else in the world. Company officers ought to think twice if they want that trend to continue.

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