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The donut speech, fact checked (IV)


 

Erin Weir goes to Tim Hortons’ regulatory filings in search of the motivating factors of corporate tax breaks.

Perhaps more importantly, Tim Hortons became an American corporation when it merged with Wendy’s. Even after separation, it was locked into a tax-sharing agreement with Wendy’s.

When that agreement recently expired, there was no longer a reason to keep Tim Hortons organized as a US corporation when some 90% of its revenue is generated in Canada. In particular, it did not make sense for the company’s entire business, which is overwhelmingly conducted in Canadian dollars, to be taxed and analyzed in US dollars.

Therefore, it seems highly probable that Tim Hortons would have reorganized as a Canadian corporation even had Canada simply kept its corporate tax rates at US levels. If so, the Canadian government might have received a similar temporary boost in tax revenue from this reorganization without the ongoing loss of future tax revenue.


 

The donut speech, fact checked (IV)

  1. I suspected that the reason for THI’s return was due to the spinoff from Wendy’s. Thanks for the confirmation. Not to suggest that reductions in corporate tax are a bad idea, just that this particular event didn’t make much sense as proof of the policy’s efficacy. Then again, we know that it doesn’t matter if it’s true, it just has to sound plausible.

  2. well explained; this helps understand

  3. Weir conveniently misses the most obvious point: when given the choice, the tax environment is better in Canada.

    • But better for who is the key question.

    • We also have better maple syrup. It’s not at all clear that this was a significant part of the decision to reorganize. This seems to suggest that reporting requirements were enough to incent the relocation.

    • No. He is addressing the main point: whether they changed their corporate holding company "as a direct result" of the Conservatives tax changes as claimed by Harper.

      Clearly, they did not.

      Is the tax environment in Canada better than in Delaware? We have no information on this one way or another in any of this.

    • I don't miss that point at all. My post (linked by Wherry above) states, “Throughout the filing, Tim Hortons affirms its eagerness to take advantage of lower Canadian corporate tax rates.”

      I do, however, question whether lower Canadian corporate taxes were a necessary condition for the decision to reorganize as a Canadian company.

      • Right then, Wherry chooses to highlight only your conclusion that misses any mention of the obvious point.

        • "misses any mention of the obvious point"

          That Harper is lying when he says that Tims in changing the jurisdiction of its holding company is "returning to your Canadian roots after 14 years away"? Its head office, decision making and global operations never left Oakville.

          That Harper is lying when he says that "As a direct result of Conservative action to cut corporate taxes"? We know this now to be untrue.

          That Harper is lying when he says that Tims has changed "its base of operations"? This was obviously never true and journalists should have pointed that out right away, instead of just accepting Harper's spin.

          That Harper is lying when he says that this routine internal corporate reorganization will "create new jobs and generate economic activity"? We know now directly from Tims that this is not true.

          These are all obvious points. Which one does Aaron miss?

          • Aaron? He doesn't make any point at all. It's Erin Weir who is making the points. And if you had bothered to read his contributions here, you would have seen that he makes a lie of your claims of lies:
            Throughout the filing, Tim Hortons affirms its eagerness to take advantage of lower Canadian corporate tax rates

        • Ed, Wherry plainly highlights the part where Erin seems to miss, not downplay but refutes, as he says above, the notion that lower tax rates were a necessary condition. what do you read "Therefore, it seems highly probable that Tim Hortons would have reorganized as a Canadian corporation even had Canada simply kept its corporate tax rates at US levels." to mean?

          Again you an I agree that at times Aaron is not as clear as we like but this is not that.

  4. "it did not make sense for the company's entire business"

    Has Weir ever heard of flag-of-convenience when it comes to shipping? PM Martin thought it made sense to register his company in Bahamas even though an insignificant amount of business occurred there and the company was headquartered in Montreal. And why did Martin think this made sense? Because of taxes.

    • I thought it was environmental regulations.

    • I think that international shipping is a little different because the business is never concentrated in one country.

      More fundamentally, should we respond to “flag of convenience” practices by making Canada a tax haven too? A better solution might be to strengthen corporate tax rules and their enforcement.

      • Canada Steamship Lines, of Montreal, is not concentrated in Canada? Okay, I guess then, that CNR and CPR are not concentrated in Canada either, because they mostly carry resources for export markets or commodities for import markets.

        • I think the only point – and this is not excusing Martin – is that international maritime law is a very complicated piece of work and where the ships – the assets and value of the business, the "operations" of the business – actually are docked is more important than where the headquarters are.

          But what I don't fully understand is why "concentrated in Canada" matters to you. You seem to think that Tims changing the jurisdiction of its holding company was a big deal but the location of its operations, where its corporate and head office decisions were made, where its global head office and head quarters were actually located, where 90% of its profits were already taxed and continue to be taxed, i.e. where Tim Hortons was "concentrated", did not matter, so why does it matter what flag CSL ships carried.

          • No, I was pointing out an inconsistency in his argument, nothing more. I agree that maritime law is the real culprit allowing shipping companies to choose flags of convenience.

            Canada should pursue equitable and sensible taxation schemes, and try to prevent abuses, like royalty income trusts.

          • What inconsistency? CSL moves goods between countries, whereas the railway companies move goods within Canada. (Admittedly, CN's acquisition of Illinois Central softens this distinction somewhat.)

            Anyway, you seem to agree that international shipping is exceptional.

    • You have obviously heard of the concept of "flag-of-convenience", but do you understand what it means?

      It is a specific industry term in shipping. A ship must have a land and jurisdictional "home" under international shipping laws. The deal between countries is that, but for some agreed international shipping rules/laws, domestic laws (including tax laws) will govern over each ship. Otherwise, every jurisdiction would (and used to) try to claim some tax on the shipping revenues from its ports. Each ship is "flagged" as ship owned by a, say, Bahamas company and is considered a Bahamas ship governed by Bahamas law. This is allowed because of international maritime laws.

      Some like to use the concept for non-shipping tax jurisdiction "shopping", but it doesn't really work that well as a parallel concept.

  5. Thank you Aaron, for being the only journalist in the entire country who actually thinking about what Harper has said about him taking credit for this routine corporate reorganization and then exaggerating the effects and implications of changing the jurisdiction of its holding company.

    This shows even more clearly how much the Conservatives are outright lying about this.

    The bigger the lie, the less likely us mere voters will question him, I guess is their thinking. After all, as we know from them, it doesn't have to be the truth, it just has to sound plausible.

    • Wherry may be correct about some of the assumptions he makes about why the move was made by Tim`s back to Canada. Unfortunately, because of his past irresponsible rants nobody will pay any attention to him.

      • Please show me a single "rant" from Wherry?

        Even if you want to try to claim, against the evidence, that he is clearly biased one way or the other (and we could have a good argument about which way), it seems to me that he either puts up quotations with a line or two which can hardly be described as a rant or (b) he summarizes the silliness of Question Period in which he is decidedly (and probably carefully) equal in his ridicule.

        • If you are still trying to figure out which way Wherry is biased, then I would be wasting my time pointing out his past biased rants. But you should understand that when you line up with Wherry in fantasy land, then most people will be skeptical about anything you say.

          • So no examples of his "rants" I take it? Thought so. Just more whining in fantasy land about how any critique of Conservatives, however soft and humourous and roughly equal to the soft and humourous critiques of the other parties, is outright bias and ranting.

  6. Aaron is clearly skilled at pointing out glaring, blinding, bloody obvious contradictions between real life and government news releases. At this time, and no doubt to your excessive joy, the Conservatives form the government. I suggest, Sir, that you wait until another party forms the government and see if Aaron treats them with equal disdain before pronouncing "Bias!" like a typical blathering, fire-breathing raging partisan.

    • Aaron is clearly skilled at inventing contradictions through extremely selective editing of material. Wherry may not have a particular partisan bent, but it is clear that he has an ideological one.

      • "Inventing", eh? That is a stretch and a half.

      • Given that he's done it to all leaders, what would that ideological bent be?

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