In light of Burger King’s recent acquisition of Tim Hortons, economic and political pundits on both sides of the border have been debating about the motivation of this $12.5-billion takeover. In reality, there is no debate since it is clear that the deal — accompanied by the relocation of Burger King’s headquarters to Canada — is all about dodging taxes and increasing profits for the bosses while workers get left behind.
John Wonfor of BDO International, a multinational accounting firm which helps corporations lower their tax burden (and, incidentally, indicted by the IRS), had this to say about the merger:
“The American corporate tax rates are extremely uncompetitive; they are among the highest corporate tax rates in the world. Canada’s tax rates are very competitive. When you look at OECD countries, we’re about the middle of the pack. … We are not a corporate tax haven around the world, but if you compare us to the U.S. these days, we’re looking pretty good.” (Toronto Star, 25 Aug. 2014)
Since Paul Martin, the former Liberal finance minister, began slashing corporate taxes, the Canadian corporate tax rate has been halved; on average, Canadian corporations’ taxes are 46.4% lower than their US counterparts. The Canadian Taxpayers’ Federation (CTF), a right-wing conservative outfit that, in reality, stands for the interests of the bosses, is rejoicing at the fact that Burger King is moving to Canada. “By creating a low-tax jurisdiction, you’re creating more opportunity to tax,” said the Ontario director of the CTF, Candice Malcolm. Of course, this generosity to Canadian companies has been offset by cuts to social spending and increased costs of government services being borne by workers.
The proposed merger, which would produce the world’s third largest fast food distributor, is obviously coming under scrutiny by both the Canadian and US governments, not to mention by their working-class customers. Those involved in the mergers are moving heaven and earth to prove to Canadian and US workers alike that this merger has nothing to do with tax avoidance. “Absolutely not,” said Tim Hortons CEO Marc Caira emphatically when asked about it. Warren Buffet, who had a hand in the deal, also made the same reassuring statement that the merger isn’t about dodging taxes. He even went as far as saying that the relocation of Burger King’s headquarters to Ontario is about making Canadians happy. “I just don’t know how the Canadians would feel about Tim Hortons moving to Florida,” said Buffet.
At the end of the day, moves such as this one are a cynical game dictated by profits, not by any nationalist sentiment or genuine concern for customers. It is business as usual as a shrewd capitalist might say. The market does not lie, either. Since the deal was made public, both companies’ shares have jumped by more than 20 per cent in price: Tim Hortons’ from $63 to $87, and Burger King’s from $26 to $32. Investors understand clearly that their interests will be better served by paying less tax by moving Burger King’s headquarters to Ontario.
In this business drama, Canadian and American workers are being pitted against one another, as well. Business leaders and groups like the CTF are urging workers on both sides of the border to push for lower corporate taxes in order to better attract businesses. Canadian and US workers are being told that they should welcome a race to the bottom, that everyone will benefit from lower wages and more “flexible” labour laws. In reality, it is only the bosses that stand to gain from this competition between workers on opposite sides of the border.
Right-wing politicians and pundits in the US have seized upon Burger King’s relocation as yet another example of a US company moving to a more “tax-competitive” country, to hammer down that what the US needs is an even lower corporate tax rate. Senator Sherrod Brown, a member of the Senate Finance Committee and a senior member of the Senate Banking Committee, has called for a lower corporate tax rate as “an immediate fix” to stop tax runaways. In his statement, he said:
“This kind of common-sense reform will close down tax havens that cost our country revenue and cost American jobs. Lowering the statutory corporate tax rate would put companies on a level playing field with foreign competitors and reduce the incentive for them to shift jobs and profits overseas.” [Emphasis added]
Meanwhile, the Sun News Network in Canada has also seized upon this opportunity to argue for even lower corporate taxes in Canada, up to its abolishment altogether. It wrote:
“The argument for continued corporate income tax rate cuts at the federal and provincial levels, and perhaps the abolishment of the tax altogether, is straightforward and convincing. It should appeal to patriots and progressives alike — and most of all: workers.” (Toronto Sun, 27 Aug. 2014)
It is a race to the bottom that many workers know all too well. They have seen it themselves when they are asked to lower their wages and clock longer hours. If they don’t, the bosses promise to shut down business and move elsewhere, where other workers are willing to work for less, or in more dangerous conditions. Under capitalism, this is the name of the game — which workers are willing to toil for the least return?
What this merger has also shown is that capitalists do not have an iota of care for nationality. While workers are being asked to be patriotic and swear loyalty to the flag, the capitalists’ only true allegiance is to profits. Nationalism is only important in getting customers through the doors. Through a series of sickeningly maudlin advertisements over the past 25 years, Tim Hortons has been able to bamboozle millions of workers into believing that Canadian identify is defined by dishwater coffee, crusty donuts, and flavourless sandwiches. However, they hardly mention the fact that between 1995 and 2006, Tim Hortons was owned by US-based Wendy’s, nor the fact that the company is now being sold to Burger King (which itself is owned by Brazilian financial company 3G Capital). Thus, for those who are now raising such a hue and cry about the loss of a Canadian icon, with heavy hearts we have to inform them that their grievance is a tad too late.
President Obama and the Democrats have denounced such tax-dodging deals and called for “economic patriotism”. Alas, such patriotism is only in words and no sane capitalist ever heeds its call. Let us remind readers that over the years, the so-called “philanthropist” Warren Buffett has been putting himself out there as a vocal advocate for Obama’s effort to increase taxes on the rich and to close tax loopholes. In a 2011 op-ed for the New York Times, Buffet scathingly wrote that the government should “stop coddling the super rich”, admonishing those mega-rich friends of his who have been “left untouched” from doing their share of “shared sacrifice”. He admitted what has already been known to many, “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”
Since that op-ed was penned, the mega-rich, including Buffet himself, continue to get their extraordinary tax breaks while US workers are still struggling to make ends meet. While Buffett tells others to pay higher taxes, the holding company that he runs, Berkshire Hathaway, the fifth-largest public company in the world with total assets worth more than $500-billion (US), is involved in all kinds of tax-avoidance schemes. Buffett himself has earned the nickname, “Master of Tax Avoidance”, from the chairman of the economics department of Harvard University, Greg Mankiw. Thus, not one serious capitalist has ever been alarmed by Warren Buffett’s “socialist” rant about higher corporate taxes because they all know that it is a mere posturing from one of the oldest conniving oligarchs in the USA.
This tax-avoidance deal of Tim Hortons and Burger King must be called out properly as it should be — an act of thievery against the working class in both Canada and the USA. It will not benefit North American workers, or anywhere else. It will not improve the working conditions and wages of the 140,000 workers who toil for minimum wages at these chains. It will not help the thousands of temporary foreign workers at Tim Hortons who are daily cheated out of their wages, who constantly live in fears of their bosses because they do not want to be sent home.
However, we must be clear that the biggest thievery against the working class is not corporate tax avoidance or tax breaks. The biggest thievery is the fact that our world is bestowed with such wealth and richness, with such talents and potentials amongst its inhabitants, but under capitalism they are all wasted in the name of profits. As banks and corporations hoard hundreds of billions of dollars, workers are left to beg for the table scraps, selling their labour power to the lowest bidder. Hundreds of millions, if not billions, of hands are left idle or semi-idle because capitalists are not willing to create enough decent jobs if there is no profit to be made. While people are begging for work in this crisis, the capitalists are sitting on a pile of money — $560-billion worth of “dead money” in Canada alone — while asking workers and governments to give them more.
The solution is not to prevent the merger, or to keep Tim Hortons on Canadian soil and Burger King on US soil. The solution will not be found in raising corporate taxes or fool-proofing the tax code; the bosses, with their army of lawyers and accountants — and lawmakers in their back pockets — will always find ways to circumvent them. The solution lies outside capitalism. These big corporations have to be put under the ownership and democratic management of workers, operating not for profits but to meet human needs. Under socialism, the hundreds of thousands of workers who toil in fast-food chains and the families who depend on them will be lifted out of poverty. No longer do they have to live with poverty wages and the indignity that comes with the job. They will be seen as an integral part of the society, serving hearty and healthy meals to their fellow workers. Fast-food jobs — which under socialism will probably not be referred to as “fast-food” any longer — will no longer be seen as a last resort which you take when no one else wants to hire you.