Big Deal Inversion
This could blow the lid off.
Burger King.
http://money.cnn.com/2014/08/26/news/companies/burger-king-tim-horton/index.html?hpt=hp_t2
What more iconic American company is there? Coca Cola? Too late. They probably already inverted.
Burger King bought a Canadian company and plans to do some things to cut their American income tax. Burger King is owned by 3G Capital and the Brazilian trio. Very, very smart people who turn around every company they buy. I’m a big fan of these people. And what they’re doing is completely ethical, (Judge Learned Hand said so. Google it up) legal and dictated by economics.
They’d be idiots if they didn’t invert. Their investors would run them down and string them up. (Although I think they’re probably too smart to deal with actual stockholders. I doubt if they have any of those.)
Inversion is the practice of buying a foreign subsidiary and moving their tax base to the foreign company, thereby skirting some income tax.
But from my understanding, Burger King intends to do something that may eliminate all U.S. income tax. This is how it’s probably going to work. The following may not be in accordance with the article or the video or public pronouncements. But it’s what I hear is going on.
From what I understand, they are going to refinance all their corporate debt by borrowing from Warren Buffet’s company, Berkshire Hathaway. (They have a lot of debt from the original acquisition.) The loan will be made to the Canadian company who will loan it to the American company, charging enough interest to wipe out all American income, there by diverting all American income to Canada. This isn’t even a sophisticated technique. This is a bottom shelf, plebian, ordinary tax strategy that any yo-yo could have dreamed up. But it’s simple, and the Brazilian Trio believes simple is better. And I would tend to agree. After all, MPAI.
The deal is what it is. It could have long term ramifications on the government. Those people with their noses stuck in the air can’t continue to ignore everything they don’t like, as though this were a fairy tale. This stuff could tear our country apart.
But that being what it is, that’s not the reason I wrote this. I wrote this to take a dig at Warren Buffet. Bill Gates’ pal. (Gates’ claim to fame is he knew Steve Jobs.) Some background. Warren shot to fame as the guy standing behind the President nodding like a puppet when the President told us why we needed to pay more income tax. He’s the same guy who famously said, “The rich should pay more tax.” He’s the guy the President hung a medal on (see link below). Buffet’s in bed with the Brazilian trio on other investments (Heinz Ketchup). Which is damned smart and damned lucky of him. Can’t fault him or them on this. This is the guy (I assume.) who is going to loan the money to the Canadian company to loan it to the American company to gouge it on interest to transfer all American profits to Canada. (It’s really not an investment (wink, wink) but I’ll bet it’s a convertible note, or I’ll bet it gets converted at some time.)
All of this would be perfectly OK if he didn’t shill for tax increases. But he did and it’s not OK to switch horses in the middle of the stream. I’m sure you all know that.
This is the same Warren Buffet that doesn’t pay his own taxes.
http://www.frontpagemag.com/2012/dgreenfield/warren-buffett-owes-1-billion-in-back-taxes/
So the guy who said we should pay more tax does avoid taxes himself and is going to avoid them even more in the future. That’s all well and good, but he doesn’t think we should. And he loves it when he’s on TV and the President is blowing sweet nothings in his ear.
Veracity apparently means nothing to this guy.
bizztrategy @ Ellis CPA 