Tim Hortons deal could spark ‘inversion’ frenzy
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Aug 27, 2014  |  Vote 0    0

Tim Hortons deal could spark ‘inversion’ frenzy

The perception that rules may be amended “has created a sense of urgency” on the part of corporations, including some facing market pressures to follow competitors, report says


A backlash against corporations repatriating abroad to lower tax bills may spur even more so-called inversion transactions as companies rush to make the move ahead of an expected crackdown by governments in the U.S. and the U.K.

The perception that rules may be amended “has created a sense of urgency” on the part of corporations, including some facing market pressures to follow the footsteps of their competitors, according to a report by Osler tax partners Firoz Ahmed and Paul Seraganian.

Published before Miami-based Burger King’s announcement this week that it will acquire Canadian breakfast food chain Tim Hortons — ostensibly to benefit from advantageous Canadian taxation of profits generated offshore — the report said Canadian companies are in the takeover sights of U.S. firms mulling inversion (in which a U.S. parent becomes a subsidiary of a non-U.S. parent corporation.)

And while most of the deals have involved major, publicly traded businesses mainly in the pharmaceutical sector, experts say there is emerging interest in these transactions among smaller public and private companies in a more diverse range of industries.

Aside from Tims, recent inversion transactions include Endo International’s acquisition of Canadian-based Paladin Labs in February, Perrigo’s acquisition of Ireland-based Elan Corporation and the combination of Liberty Global and Virgin Media, along with Pfizer Inc.’s recently announced bid to take over U.K.-based AstraZeneca.

In the case of Burger King, the offer for Tims has put it in a political minefield and has sparked outrage from some public interest groups who are calling for a boycott of Burger King products in the U.S.

And while inversion refers to corporations seeking to escape the high corporate tax rate stateside, tax haven shopping has become increasingly popular across the globalized economy.

Amazon sparked an outcry after it relocated its headquarters from London to Luxembourg, where it has reduced its tax bill, with its European tax strategy galling the French government as well.

Britons, who have faced reduced public spending and unpopular austerity measures, have taken to Twitter to express their fury at big multinationals who they say are gaming the system, arguing that corporate breaks help keep personal tax rates high.

Some also question whether the tax savings justify the downsides in bad publicity and government scrutiny.

As well, research suggests that tax considerations are low on the list of relocation considerations for most fast growing companies, who value available talent pools and abundant access to suppliers and customers above all.

A report from non profit research group Endeavor Insight, for example, surveyed 150 founders of top U.S. companies and found just five per cent of the respondents cited low taxes as a key factor when choosing a city to locate a business, well behind items such as rents and quality of schools.

Toronto Star

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(1) Comment

By Hadenoughyet | AUGUST 27, 2014 09:37 PM
Canada has officially become a tax haven for corporations.............The government promises it will create jobs, however fails to tell you they will be low wage jobs, and profits before people will be it's number one rule. Once again the rich make their millions and Canadians continue their march into poverty..............
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