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I don’t have anything against Canada or Canadians. I spent some time at my grandparents’ cabin on Lake Temagami as a kid, and loved picking blueberries, canoeing and exploring the woods.
But let’s face it: I like my bacon American-style. I mean, Canadian bacon is basically ham, right? I’ll watch football over hockey any day. And the only curling I know about is the kind my wife does to her hair when we go out for special occasions. LOL.
But the real threat — from Washington’s perspective — is that Canada could become the latest, greatest tax haven for American corporations!
Look at the deal Burger King Worldwide (BKW, Weiss Ratings: B) made official today. It’s buying Canadian doughnut and coffee chain Tim Hortons (THI, Weiss Ratings: B+) for $11 billion, adding that company’s 4,500 locations to its own 14,000 restaurants.
|Miami-based Burger King is planning to buy Tim Hortons and move the combined company’s headquarters to Canada, where corporate taxes are lower.|
More importantly, Miami-based Burger King plans to shift its headquarters across the border to Canada. What’s behind the latest “tax inversion” deal? The fact that Canada’s federal corporate tax rate is 15 percent, far lower than the 35 percent rate here!
Even if you throw U.S. state and local taxes into the mix here … and Canadian provincial taxes on the table there … the numbers still favor our neighbors to the north. Corporations can face combined tax rates of up to 40 percent here vs. 26.5 percent there. Also, Canada only taxes income earned within the country; the U.S. taxes profits earned in foreign countries at the higher U.S. rate when they’re repatriated.
That’s not all, either. The accounting firm KPMG ranked 10 major countries for business friendliness recently. Canada had the second-lowest costs. The U.S. had the second-highest!
“Should we just say goodbye and good riddance to Burger King?”
Washington politicians can whine all they want about tax inversions, and they are. The Obama administration is threatening to eliminate the maneuver via executive order. Some Democrats and Republicans in Congress are trying to get anti-inversion legislation off the ground, too.
But nothing concrete and immediate is happening, which means more companies could follow Burger King’s lead and cross the border. If you happen to be a shareholder in a Canadian or American company, that could work out great for you. Both Burger King and Tim Hortons shares have surged in the wake of this merger news.
The question I have for you is, what does this mean for America? Does it prove we need to get much more competitive when it comes to corporate taxation? Should we just say goodbye and good riddance to Burger King, and stop eating Whoppers in protest?
Does this deal and the business-friendly policies that helped drive it make you more likely to invest money in Canada? Perhaps via something like the CurrencyShares Canadian Dollar Trust (FXC) or the iShares MSCI Canada ETF (EWC)? Let me know at the Money and Markets website here.
|OUR READERS SPEAK|
There’s a lot of lively discussion on the big issues of the day going on at the website. So I hope you’re contributing and finding some valuable insights.
When it comes to the ongoing skirmishes between Ukraine and Russia, some of you believe we’re not getting the full story on what is happening.
Reader Joel said: “I’d like to suggest that you examine evidence concerning the crisis in Ukraine that does not rely on information from the controlled American MSM. Is it logical to rely on the controlled media to tell us the truth about this crisis, when they have steadfastly refused to tell the American public the truth about the administration’s failed and flawed economic, national security, immigration, affordable and VA healthcare policies? I don’t see how.”
And Reader Willem E. said: “Well done on Putin and Russians to send humanitarian aid to the distressed people of eastern Ukraine. I don’t see the NATO or EU doing anything. I see a lot of rallying behind the America flag on M&M. If I was Putin I would’ve done everything he has done. NATO (and the weapons producers) needs a reason to exist, give the people an enemy: Russia/Putin.”
Meanwhile, when it comes to investing in energy, Reader Jay D. asked how he could get specific recommendations on what oil and gas stocks to buy, while Reader Tim asked what he will get in Safe Money.
My answers: I’ve been recommending select, safer, highly rated energy stocks in Safe Money for the past couple of years. Several of those recommendations have been highly profitable — including one that has more than doubled in value.
Finally, Reader Don notes one of the ways the U.S. energy industry can continue to prosper over the coming few years. His comments: “It won’t be quick, but the best thing we can do is expand refining capacity, so that we can export finished product to Europe and others. This will leverage our oil reserves to the best advantage.”
Good point, Don! And if anyone else has more investment ideas to share, just click here
|OTHER DEVELOPMENTS OF THE DAY|
Surveillance drones and spy flights are going to start in Syria, according to multiple media reports. You can bet that means anti-ISIS airstrikes are coming next, following on the heels of recent attacks in Iraq.
The beat goes on in the Ukraine-Russia saga, with Ukraine saying it nabbed 10 Russian paratroopers on its side of the border. Russia says the soldiers just accidentally crossed the poorly marked frontier.
Billionaire investor Warren Buffett has been an outspoken advocate of what he calls fairer taxes — higher tax rates and limited deductions for high-earning bigwigs like him.
But it turns out, his Berkshire Hathaway firm is reportedly helping finance Burger King’s effort to flee America to avoid taxes! He will supposedly cough up roughly 25 percent of the financing via the purchase of preferred shares, though details are still sketchy at this time. Interesting turn of events to say the least.
U.S. durable goods orders skyrocketed 22.6 percent last month — the biggest increase in history. Too bad that the strength stemmed mostly from incredibly volatile aircraft orders. Readings on ex-transportation orders, and on business spending, were disappointing … though the declines followed large increases in June.
Reminder: You can let me know what you think by putting your comments here.
Until next time,