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WHAT DOES CORPORATE ‘INFUSION’ MEAN?

Posted by Tim Bryce on October 10, 2014

BRYCE ON POLITICS

– Or is it a misnomer?

(Click for AUDIO VERSION)
To use this segment in a Radio broadcast or Podcast, send TIM a request.

One of the latest $3 words invented by the media is “inversion” and is used to describe the transfer of corporate headquarters, and jobs, to another locale outside of the United States. When I first heard the expression, it conjured up an image of an office turned inside-out, but that is not exactly what is meant. Perhaps the best example for describing the concept is the recent merger of Canadian based Tim Horton’s restaurants (coffee and donuts) with fast food giant Burger King of Miami, Florida. In doing so, Burger King opened the door to move their headquarters from Miami to Toronto, thereby escaping America’s high corporate tax rates.

A handful of Senate Democrats cried foul when they learned of the move and accused Burger King of being unpatriotic and not paying their fair share of taxes. Patriotism has nothing to do with it. This is a smart business move in these troubled economic times and, frankly, I’m surprised we do not see more of it.

The impetus for this, of course, is America’s high corporate tax rate. Of all of the modern industrial countries in the world, America has the highest tax rate at 40%. By comparison, Canada offers a paltry 26.5%. Since Canada began dropping their tax rate in 2008, the Canadian economy has rebounded and turned into a dynamo.

Likewise, Japan, who had higher rates than the United States, began lowering their rates in 2012 and is experiencing a resurgence in their economy. In 2008, Germany also dropped their rates from 38% to 29%.

Today, the United Kingdom is at 21%. Switzerland is at 17.92%, and Ireland at 12.5%, which explains why a lot of companies are moving to these countries. It’s not unpatriotic, it is called survival. However, in doing so, a lot of jobs leave our shores and unemployment rises. One would think the Democrats do not understand the situation, that lowering the corporate tax rates would ignite the economy. Actually they understand the concept quite well, but are unwilling to drop the rate in fear of losing tax income. By keeping America’s corporate tax rate high, they are encouraging businesses to leave. The hard truth is “inversion” is not about corporate greed as it is about government stupidity.

Even the public understands what is going on better than government officials. In a recent Toronto Sun poll, when people were asked, “Should Burger King move to Canada?”

76% – Sure
19% – No
05% – Maybe

Then again, most of the people responding were likely Canadians and fully cognizant of the benefits derived from lowering corporate tax rates.

With all this said, I tend to believe the expression “infusion” is a misnomer. Perhaps it should be called a “transfusion” as overseas tax rates provide the means to survive.

Keep the Faith!

Note: All trademarks both marked and unmarked belong to their respective companies.

Tim Bryce is a writer and the Managing Director of M&JB Investment Company (M&JB) of Palm Harbor, Florida and has over 30 years of experience in the management consulting field. He can be reached at timb001@phmainstreet.com

For Tim’s columns, see:
timbryce.com

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Copyright © 2014 by Tim Bryce. All rights reserved.

NEXT UP:  HONEST DEBATE (OR THE LACK THEREOF) – Our lack of tolerance has a lot to do with it.

LAST TIME:  WHO SHOULD BE RESPONSIBLE FOR CHARITY?  – The government or the individual?

Listen to Tim on WJTN-AM (News Talk 1240) “The Town Square” with host John Siggins (Mon, Wed, Fri, 12:30-3:00pm Eastern), and KIT-AM 1280 in Yakima, Washington “The Morning News” with hosts Dave Ettl & Lance Tormey (weekdays. 6:00-9:00am Pacific). Or tune-in to Tim’s channel on YouTube.

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4 Responses to “WHAT DOES CORPORATE ‘INFUSION’ MEAN?”

  1. Dolphin, Cynthia (DOP) said

    Good morning,

    Is Outsourcing similar to your topic? Or Is it primarily referring to taxes and not just cutting cost? I have just been educated on Corporate “Infusion”. Thanks for posting.

    Cynthia Dolphin

    Liked by 1 person

  2. […] WHAT DOES CORPORATE ‘INFUSION’ MEAN? […]

    Like

  3. Ron Thompson said

    Hi Tim

    I agree with you the UK buries its head in the sand as well, in Northern Ireland which is part of the UK we pay 21% whereas in the south they pay 12.5% so the North of Ireland suffers in the business world. The UK does not understand or does not care about the problems caused by the difference in Corporation Tax on the island of Ireland. Politicos are the same the world over.

    Best Wishes

    Ron Thompson

    Like

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