Morning Money Memo…
Burger King is facing a grilling from critics of U.S. companies that move overseas to cut their tax bills.
“I’ve eaten my last Whopper,” is among the many comments on Burger King’s Facebook page.
The company announced on Tuesday that it would buy the popular Canadian coffee and doughnut chain Tim Hortons for more than $11 billion. The corporate headquarters of the combined firm will be in Canada — a move that stands to help lower Burger King’s corporate taxes.
Sen. Sherrod Brown, D-Ohio, is calling for U.S. consumers to boycott Burger King. Democrats have been calling for legislation to limit these so-called tax inversions.
But the CEO of the merged company insists the deal is not about taxes. And there appear to be strong business reasons for the firm to move. While Burger King has many more franchises, Tim Hortons has much larger profits than the U.S. firm. The deal will create the world’s third largest fast-food chain.
Burger King’s move has re-ignited the debate over the U.S. corporate tax system. This is not merely about tax rates but also the global system of taxation.
“The U.S., unlike most developed-world governments, insists on taxing the global income of its citizens and corporations that have U.S. headquarters,” writes Megan McArdle of Bloomberg Businessweek. “Because the U.S. has some of the highest tax rates in the world, especially on corporate income, this amounts to demanding that everyone who got their start here owes us taxes, forever, on anything they earn abroad.”
Christine Lagarde, the head of the International Monetary Fund, is under formal investigation by a French court for alleged negligence. The corruption investigation dates back to her days as France’s Finance Minister. Lagarde and her former chief of staff have been facing questions about their role in a payment to a businessman. In a statement today after a fourth round of questioning before magistrates, Lagarde said she was returning to her work in Washington later in the day and said the decision was “without basis.”
Apple’s suppliers are preparing to manufacture the firm’s largest-ever iPad, reports Bloomberg News. Production is scheduled to begin by the first quarter of next year. The new iPad will have a 12.9-inch screen. Apple currently produces iPads with 9.7-inch and 7.9-inch displays.
American Airlines and US Airways are pulling their flight listings from Orbitz. The decision is part of a long-running dispute over fees the travel website pays to list and sell the flights. Orbitz shares fell nearly 5% after the announcement.
Another milestone for the stock market as the 5-year bull market continues: The benchmark Standard & Poor’s 500 index closed above 2,000 on Tuesday for the first time. And the record was reached 16 years after the S&P first closed above 1,000 points.