The real story here is in the nature of the acquisition, a so-called "inversion" that will create a combined Canadian, rather than American, company, which is likely to substantially reduce Burger King's corporate tax liability.
[1] http://www.bloombergview.com/articles/2014-08-25/burger-king....
http://www.reuters.com/article/2008/08/27/us-companies-owner...
I'm getting tired of people trying to name-n-shame companies that are leaving the US in favor of substantially better tax laws.
Instead of groaning and trying to patronize these companies with some sort of nationalist pride, how about we do something about the damn tax laws that are making companies want to leave in the first place.
Should be easy to fix. Somehow it isn't.
- Why does it require a team of lawyers and tax experts just to haphazardly understand the tax law well enough to submit a corporate filing?
- Why does America have the highest corporate tax rate in the world? (besting the next highest country by 4%)[1]
- Why do we double tax corporations that earn revenue off-shore? (they pay taxes in the country they earned the revenue in -- then we tax them again if they bring that money back into the country -- effectively encouraging corporate like Apple to keep billions of USD offshore)
The list goes on ...
[1] - http://www.kpmg.com/global/en/services/tax/tax-tools-and-res...
In reality, it the tax rate wouldn't need to go to zero - just low enough that the cost of paying it outweighs all the costs (PR, resource issues, relocation costs etc etc) of moving to a lower tax regime.
That's a silly concern. Businesses do not forgo profit simply because they'd prefer if there were more. They always prefer if there were more. And yet they still seek the profit that's available. So long as cost/benefit suggests the US is a profitable market, they will continue to sell their goods here.
The only "risk" of corporations "taking their ball and going home", is if the United States pursued a transparently self-destructive tax rate on foreign-based corporations. Which there is absolutely no reason to expect would even enter rational conversation.
Imagine a husband and wife are talking about what car they should buy next and they disagree on the budget. The analogous case to a tax rate so high corporations leave the US market, is the husband deciding to burn the house down so that there's no garage and no money at all.
While that's certainly a possible alternative to negotiating their differences, discussing that alternative is, at best, silly. And attempting to ascribe serious weight to the possibility is downright intellectually dishonest.
That said, IMO the concern with them selling their goods somewhere else isn't that we won't be able to eat their burgers, but that they employ tons of people at their stores. People are going to be pissed if Burger King decides they're going to close down their slower stores in the US and open some new stores elsewhere that doesn't have tax because they'll end-up making more.
I agree in that we could put a tax in place without anything imploding, they aren't just going to run away obviously. The question is more can we implement a tax which would be worth the money we'd make off of it without it resulting in Burger King closing places around the country because they're not profitable anymore.
We're hypothetically setting out to close a loophole that results in two distinct effective rates, a lower rate A for foreign corporations and a higher rate B for US-based corporations.
So, again, why should we spend any time worrying about what might happen if we were to introduce an even higher rate C? No-one's talking about that. It's not on the table. It's not remotely politically plausible. It's not even a thing anyone's seriously proposed.
Talking about it is either entirely besides the point, or a motivated attempt to conflate closing the loophole with raising rates to C, to scare people away from trying to close the loophole.
What's more likely is that corporations would split into the global corp, and the US corp. The US corp pays the high taxes and does work in the US. The global corp owns all the IP, and leases it to the US corp for some amount of money.
Not saying the US tax situation doesn't need fixed though.
Assume the USA lowers taxes until again it is attractive to relocate businesses there. The obvious happens, and businesses move to the USA. Yay!
But other countries don't appreciate this loss of business and retaliate by lowering their taxes. Businesses again leave. So the USA lowers theirs again, and so on and so forth.
Eventually you hit a point where one country breaks and can lower their taxes no further, but everyone suffers, because taxes are now so low that revenue gained from the aforementioned business taxes is basically nothing.
It's not a wise plan.
The bothersome part is, people seem to think our country is just so great that businesses should want to pay ludicrous taxes here, almost like it's patriotic to pay higher tax rates among other things. Well, it's not.
If that was how taxes worked, everyone would move to Texas, Florida, Washington for the lack of state income taxes. And or every state in the US would have zero income tax.
And every company on earth would be in Ireland. Or every country would already have 0% corporate income taxes by now.
And the US would have lowered its corporate tax rates a very long time ago because they would have to in order to compete.
And countries with high personal income taxes (eg France) would be 'forced' to lower their income tax rates to compete with low income tax rate countries.
While you see relatively small scale effects like this, it is not as dramatic as you make it out to be. There would be no race to zero.
In fact, there is zero evidence of your scenario having ever played out on a global scale in the past century of well monitored public economic data. If a race to zero were even possible, it would have already been forced into existence, as any variance would be enough to trigger the beginning.
Let’s accept your premise. Every country competes to provide the best business environment except one. One country doesn’t compete, on principal, because the result will be that “everyone suffers”. Now who suffers?