About the only good thing about the proposed Burger King/Tim Horton's merger is that it may push ice bucket challenge and presidential golf cartoons off the page and replace them with something interesting.
Mike Luckovich gets right to the point. The term for BK's move to re-establish itself as a foreign corporation is called an "inversion," but the tax dodge is also an inversion of that old saying, "America: Love It or Leave It."
Rather than saying, "If you don't like the way we do things, get out," this puts it on the footing of "If you are leaving, don't try to tell us how much you love America."
Harsh image? Yeah. So?
Nick Anderson makes something of the same point, except that, rather than going straight at BK, he criticizes the supporters of the move.
And there are such, even though they couch it in "This is all your fault" language which makes it a little hard to parse their exact meaning.
Gary Varvel picks up on the "Have It Your Way" slogan from days gone by, but, posting this on his Facebook page, he asked readers how they felt about our tax structure, suggesting that, while he is sorry BK is moving, it's not their fault.
Opening the tax code to revision is a perfectly reasonable outcome to wish for, though it takes some imagination to expect anything coherent, much less effective and just, to emerge from the current Congress.
When you have two competing points of view -- that it is disloyal to bail out on the nation versus that it is sad that our tax laws are anti-business -- it becomes hard to sort out the intent when two cartoonists well-established as being on different sides of the aisle come up with much the same Whopper gag.
It's also not easy to find an explanation of inversions that isn't either eyes-roll-up-in-your-head technical or completely slanted in one direction or the other, but this New Yorker piece seems accessible and reasonably neutral (at least to the extent that a writer is not required to check his brains at the door).
And it includes the fact that BK is denying that the merger is part of a plan to avoid taxes, though we should be clear that, while their denial is a fact, their actual intent remains open to interpretation:
Last month, when Mylan, a pharmaceutical company, agreed to acquire Abbott Laboratories’ European generic-drug business and move its headquarters to the Netherlands, its C.E.O., Heather Bresch, explicitly noted that the deal had to do with lowering the company’s taxes. But when Burger King and Tim Hortons announced the acquisition, they made little mention of taxes. On a call with reporters on Tuesday morning, Burger King’s executive chairman, Alex Behring, said that he wanted to address one particular “story line” that had emerged about the deal. “This is not a tax-driven deal,” he said. “This transaction is fundamentally about growth, and the focus is on creating value through accelerated international expansion for both brands.” Daniel Schwartz, Burger King’s C.E.O. added, “We don’t expect there to be meaningful tax savings, nor do we expect there to be meaningful changes to our tax rate.”
That, however, is an issue of public perception, which, while not to be ignored, is not the only piece of the puzzle.
It's not a small piece of the puzzle, mind you, and those who champion the public good can take some hope from the recent Market Basket uprising, in which a combination of wildcat strike and customer boycott forced a regional grocery chain to reverse a much-despised decision.
The outpouring of objections could force BK to back out of the deal without testing the potential for a consumer action. But the bottom line is, they don't have to convince you or me or any cartoonists of their sincerity. They only have to persuade the courts that they aren't doing this simply for the tax break.
And the current Supreme Court is not exactly hostile to the rights of corporate people.
Free market anti-taxers (as seen in this pro-inversions explanation) are fond of this quote from Judge Learned Hand:
"Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury. There is not even a patriotic duty to increase one’s taxes."
True enough, as far as it goes.
But, as with a lot of really useful quotes, it's most useful if you ignore its context, and this one came with a heaping helping of "however."
In the case at hand, Gregory v Helvering, the Second District reversed a tax court ruling that had gone in favor of a taxpayer, and Justice Hand, having granted that, indeed, there is no obligation to pay a higher tax than required, added the however, which was that it is improper to game the system by making a move that serves no discernible business interest beyond gaining the tax advantage.
The Supreme Court agreed with Hand, and, even if there were a higher court to which one could appeal, dude, when they hit you with the ol' res ipse loquitur, you're dead meat:
In these circumstances, the facts speak for themselves and are susceptible of but one interpretation. The whole undertaking, though conducted according to the terms of [the statute], was in fact an elaborate and devious form of conveyance masquerading as a corporate reorganization, and nothing else. [ . . . T]he transaction upon its face lies outside the plain intent of the statute. To hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose.
Hence, due diligence and fiduciary responsibility to shareholders requires that you explain how merging with Tim Horton's will create a much more wondrous, efficient and profitable company with (insert Dilbertian bafflegab catchphrases), and how, in fact, not only was tax avoidance not your intent but there won't really be any particular advantage gained.
Or, at least, not that you're aware of at the moment.