Warren Buffett might very well be America’s favorite investor, but his latest deal may backfire and prove to be highly unpopular with many of his followers.
If, as reported by The Wall Street Journal and other news organizations on Tuesday, Buffett is putting up 25 percent of the financing for Burger King’s acquisition of Canadian fast-food operator Tim Hortons (a coffee-and-doughnut chain), he is wading deeply into the political debate over corporations and taxes.
This looming deal of food giants seeking a larger global footprint involves what’s called a tax inversion — Burger King, currently based in Miami, would move its headquarters to Canada and thus lower its U.S. tax bills.
To many people, “inversion” sounds a lot like tax evasion. Congressional critics and President Barack Obama are on the warpath about such deals. The outcry, for example, may have recently caused the Walgreen Co. to change its mind about moving to Switzerland as part of the acquisition of a drug company.
A blogger for Forbes reminds us that Buffett told CNBC in May that he didn’t think American corporations were overtaxed. And he said of tax inversion deals, “it does get a little annoying when we see other people paying far lower tax rates while engaging in the same sorts of businesses that we engage in.”
Assuming this multibillion-dollar deal goes through in the coming days, it’s hard to believe that it’s solely dependent on the tax savings presented by a Burger King flight across our northern border. Buffett’s Berkshire Hathaway is taking a $3 billion position in the deal, according to reports.
If Buffett were truly the everyday voice of reason in the business community and among American shareholders — as when he calls for the wealthy to pay their fair share of taxes — he ought to speak up on this issue.
He should argue strenuously and convincingly for keeping Burger King’s headquarters in the U.S. Anything less might be seen as hypocrisy.
Copyright Kansas City Star. Reprinted with permission.