Rep. Chris Van Hollen (D-Maryland), the ranking member of the House Budget Committee and a co-sponsor of a bill to halt the flow of corporate inversions, believes a potential deal between Burger King and Canadian coffee and doughnut chain Tim Hortons will fundamentally change public opinion about the practice and potentially needle Congress toward a solution.
“If I were McDonald’s, I’d be launching a ‘Buy America’ campaign the next day,” Van Hollen told Business Insider Monday afternoon.
“I think American consumers are not going to take kindly to an iconic American company dodging its tax obligations.”
At 35%, the U.S. has the highest corporate tax rate in the industrialized world. In Burger King’s case, Canada is attractive because its corporate tax rate is just 15%. But the proposed Burger King-Tim Hortons deal is different from most other corporate inversions that have taken place or have been part of discussions over the past year.
The practice has mostly been attractive to large companies in the pharmaceutical and healthcare industries. Before the Burger King talks, the most household name to be featured in inversion discussions has been Walgreens, which dropped its bid to move its tax base overseas as part of acquiring European pharmacy chain Alliance Boots.
“If this merger goes through, there could well be a strong public reaction against Burger King that could more than offset any tax benefit it receives from a tax avoidance move,” said Rep. Sander Levin (R-Michigan), who introduced the House’s legislation.
Sen. Sherrod Brown (D-Ohio), a supporter of tax-inversion legislation in the Senate, suggested consumers should turn to Wendy’s or White Castle for their hamburgers.
Van Hollen compared the proposed Burger King deal to Walgreens, but he said it goes even further as an iconic American institution that millions of Americans frequent on a regular basis.
“Burger King is a household name. Everybody knows Burger King,” he said. “People can relate in a visceral way to this issue.”
Van Hollen said he hopes if the American public’s consciousness is woken up by the proposed Burger King deal, congressional Republicans will be spurred to act on inversion-related legislation. Many Republicans agree on the need to address inversions, but they think it should be part of comprehensive tax reform.
In an interview with Business Insider over the weekend, Rep. Paul Ryan (R-Wisconsin), the chair of the House Budget Committee, agreed that inversions represent a “dangerous trend.” But Ryan, like many other congressional Republicans, favour a fix to inversions as part of broad, overall tax reform. But that’s a big project that likely won’t even begin to be tackled until next year.
“I think this is going to create a huge backlash in the country and, I hope, in the Congress,” Van Hollen said. “And I hope this will spur congressional Republicans to act on an immediate basis. We’re all in favour of tax reform, but we need to address this particular piece immediately.”
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