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Harper welcomes Brazilian purchase of Tim Hortons

Oakville, Ontario-based Tim Hortons has agreed to a $12.5 billion merger with Miami-based Burger King. The New York-based Brazilian private equity group 3G Capital will own 51-per-cent of the new company. American billionaire Warren Buffett’s Berkshire Hathaway Inc. committed $3 billion of preferred equity financing to the deal.

So is it bad news for Stephen Harper – who once delivered a speech at a Tim Hortons rather than the United Nations – that the iconic Canadian doughnut store chain is now owned by a Brazilian equity firm and an American fast-food restaurant?

It would appear not. In fact, he may celebrate it.

Toronto Star columnist Tim Harper writes, “It may not be as warm and fuzzy as a frigid ice rink on a winter’s dawn, but the $12.5-billion takeover of Tim Hortons by Brazilian-owned Burger King is now a powerful symbol of Harper’s cuts to corporate taxes and his move to make Canada more business-friendly.”

The Canadian Press explains that’s because, “The acquisition … moves the merged company’s global headquarters to Canada to take advantage of lower corporate taxes. When the companies disclosed the talks on Aug. 24, it revived debate over American companies shifting their headquarters to other countries in search of lower corporate tax bills.”

The columnist adds, “Expect the Burger King deal to be part of Harper’s key economic message going forward, even if the tax savings for the burger chain may not be all they seemed at first glance. Canada’s basic corporate tax rate is about 26 per cent, while it is about 35 per cent in the U.S., but both companies paid a rate in the range of 27 per cent at the time of the deal.”

That said, Matt Levine explains in Bloomberg that the logic may be: “If we’re incorporated in the U.S., we’ll pay 35 percent taxes on our income in the U.S. and Canada and Mexico and Ireland and Bermuda and the Cayman Islands, but if we’re incorporated in Canada, we’ll pay 35 percent on our income in the U.S. but 15 percent in Canada and 30 percent in Mexico and 12.5 percent in Ireland and zero percent in Bermuda and zero percent in the Cayman Islands.”

Harper notes that Burger King “facing a consumer backlash south of the border where ‘tax inversion’ has become an issue” will argue that “the deal was all about growth and the Canadian market and that was why the newly merged company would be headquartered in Oakville.”

We’ll see if the Conservatives continue to celebrate if job cuts follow this merger.

The Wall Street Journal reports, “Burger King said they expect no changes to ‘restaurant-level employment’… Still, after buying both Burger King and Heinz, 3G aggressively cut jobs. That does not bode well for Tim Hortons’s employees.”

And as Harper celebrates Tim Hortons as quintessentially Canadian, we should keep in mind that the beloved company has rejected selling fair trade coffee, has said it needs temporary foreign workers to remain fully staffed, and that it sources palm oil from suppliers that are clear-cutting tropical rainforests to make way for palm oil plantations.