| Burger King Flips Obama the Bird; BK, Warren Buffet, Greg Mankiw, Barry Ritholtz, Mish on Corporate Tax Inversion "Fairness" Posted: 25 Aug 2014 09:10 PM PDT Obama Condemns CEOsPresident Obama is fed up with corporations no paying their "fair tax". On August 24, Bloomberg reported Inversion Express Slows to Crawl as Obama Condemns CEOs On July 24 Obama referred to companies looking to shift their domicile as "corporate deserters" and aides pledged to curtail the practice with or without Congressional approval.
Since then, no companies have announced any of these deals -- known as inversions -- and it's no coincidence, according to lawyers and investment bankers. The presidential rhetoric has caused several companies exploring inversions to put on the brakes to see what emerges from the political debate, people familiar with the preparations said.
Between mid-June and late-July, when Obama ramped up his criticism of the deals by calling companies that strike them "corporate deserters," at least five large American companies announced plans for inversions, including AbbVie Inc. and Medtronic Inc. (MDT) Since the start of 2012, 21 U.S. companies have announced or completed such deals, or almost half the total of 51 such transactions in the last three decades.
After Obama called for "economic patriotism" from business leaders in July, Treasury Secretary Jack Lew said the agency was examining options for new rules that wouldn't require Congressional sign-off. Burger King Tax BonanzaThe Bloomberg headline " Inversion Express Slows to Crawl" was good for precisely 1 day. Today we see this Bloomberg headline: Burger King in Talks to Buy Tim Hortons in Tax-Saving MoveBurger King Worldwide Inc., the second-largest U.S. burger chain, is in talks to buy Tim Hortons Inc. and move its headquarters to Canada, becoming the latest American company seeking to relocate to a lower-tax country.
Burger King would create the world's third-largest fast- food chain by merging with Canada's biggest seller of coffee and doughnuts, the companies said in a statement. The Canadian corporate tax rate is typically 26.5 percent, compared with 40 percent in the U.S., according to auditing and tax firm KPMG.
The deal renews debate over American companies shifting their headquarters internationally in search of lower corporate tax bills. The trend drew criticism last month from President Barack Obama, and his aides vowed that the administration would take action to curtail the practice.
"There's some modest political risk to the deal, but it's difficult to say because we haven't seen the administration move to block one of these yet," said Will Slabaugh, an analyst at Stephens Inc. in Little Rock, Arkansas. Burger King Dares Obama To Stop It From Fleeing To CanadaThe Huffington Post had an Obama-mocking headline: Burger King Dares Obama To Stop It From Fleeing To CanadaBurger King's plan to scurry across the Canadian border to avoid U.S. taxes could be seen as the corporate equivalent of flipping President Barack Obama the bird.
The White House vowed earlier this month to use an executive order to curb tax inversions -- deals in which U.S. companies buy smaller foreign firms in countries with lower taxes, then renounce their U.S. corporate citizenship and re-incorporate in that country.
Still, Burger King said late Sunday night that it was in talks to merge with Tim Hortons, Canada's popular bakery and coffee chain. The new, combined company would be headquartered in Canada.
In a research note, Potomac Research Group political strategist Greg Valliere said Burger King's move challenges regulators at the White House and Treasury to back up threats to crack down on inversions.
"So much for the theory that Treasury could chill future inversion deals by hinting of possible action," Valliere wrote in the note. "We still don't expect regulations to be finalized until early next year, after a deliberative comment period, but we think there's a good chance that Treasury will get a phone call today from the White House, urging quicker action."
The White House did not immediately respond to a request for comment. A Treasury spokesperson and Radina Russell, a Burger King spokeswoman, both declined to comment. Warren Buffet the Hypocrite?The Wall Street Journal reports Warren Buffett Enters Tax Fray With Plan to Finance Burger King Deal for Tim HortonsInvestor Warren Buffett is helping finance Burger King's planned takeover of Canadian coffee-and-doughnut chain Tim Hortons Inc. according to people familiar with the matter, in a surprise twist that thrusts the billionaire into a debate over U.S. taxes.
Mr. Buffett's Berkshire Hathaway Inc. would invest in the deal in the form of preferred shares, some of the people said. Berkshire is expected to provide about 25% of the deal's financing, one of the people said. The exact structure of Mr. Buffett's participation remains unclear and the discussions are ongoing.
The investment would also thrust Mr. Buffett, known for championing American companies like Coca-Cola Co. and for advocating that wealthy individuals pay their fair share of taxes, into an uncomfortable position at the center of a spirited debate over U.S. tax policy. The deal is to be structured as a so-called inversion that would move the new company's headquarters to Canada. Such deals, which can help companies sidestep taxes, have drawn stiff opposition in Washington. Barry Ritholtz, Mish on Corporate Tax Inversion "Fairness"I commented on corporate taxes many times, most recently on July 14 in Reader Emails and Other Reflections On the "U.S. Corporate Tax Dodge"Ritholtz proposes 5 measures that would promote "fair taxes". - Kick them out of U.S. stock indexes
- Create a one-time tax holiday that allows companies to repatriate off-shore cash at a reduced tax rate of 15 percent.
- Require "publicly traded U.S. companies and U.S. subsidiaries of publicly traded foreign companies to disclose two numbers from the tax returns they file with the IRS: their U.S. taxable income for a given year, and how much income tax they owed."
- Lower the top tax rate from 35% 25% or 20% but close all the loopholes
- Stop single-company legislation: Thanks to K Street's army of lobbyists, tax legislation, loopholes and giveaways are concocted that benefit single industries or companies.
" The U.S. provides an outstanding place for these companies to operate and for their employees and executives to live and work. They should pay their fair share," says Ritholtz. I replied " Ritholtz wants uniformity and fairness. I agree. Taxation at 0% would not only provide it, businesses would come to the US instead of escape from the US. How bad would that be?" One Way to Fix the Corporate Tax: Repeal ItI was somewhat shocked that Greg Mankiw, a monetarist who I have blasted on numerous occasions regarding monetary policy came to a near-correct answer on this debate. Greg Mankiw says One Way to Fix the Corporate Tax: Repeal It. "Some people are calling these companies 'corporate deserters.' "
That is what President Obama said last month about the recent wave of tax inversions sweeping across corporate America, and he did not disagree with the description. But are our nation's business leaders really so unpatriotic?
Such tax inversions mean less money for the United States Treasury. As a result, the rest of us end up either paying higher taxes to support the government or enjoying fewer government services. So the president has good reason to be concerned.
Yet demonizing the companies and their executives is the wrong response. A corporate chief who arranges a merger that increases the company's after-tax profit is doing his or her job. To forgo that opportunity would be failing to act as a responsible fiduciary for shareholders.
Of course, we all have a responsibility to pay what we owe in taxes. But no one has a responsibility to pay more.
The great 20th-century jurist Learned Hand — who, by the way, has one of the best names in legal history — expressed the principle this way: "Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes."
So here's a proposal: Let's repeal the corporate income tax entirely, and scale back the personal income tax as well. We can replace them with a broad-based tax on consumption. The consumption tax could take the form of a value-added tax, which in other countries has proved to be a remarkably efficient way to raise government revenue.
Some may worry that a flat consumption tax is too easy on the rich or too hard on the poor. But there are ways to address these concerns. One possibility is to maintain a personal income tax for those with especially high incomes. Another is to use some revenue from the consumption tax to fund universal fixed rebates — sometimes called demogrants. Of course, the larger the rebate, the higher the tax rate would need to be. Near-CorrectI do not support a VAT, but as long as we are going to have taxes at all (and we are), then we need to make them as fair as possible. A broad-based consumption tax on everything but food and medicine would do exactly that. Everyone eats, everyone pays zero% on what they eat. At times we all need medical services, and everyone would pay zero% on that in my plan. There is no favoritism, everyone pays 0% on everything but those items. Perhaps we should limit food to groceries, not restaurants. Given that the poor spend a far greater percentage of their income on food and medicine we can eliminate or reduce Mankiw's concern about being " too easy on the rich or too hard on the poor". Big Fear: Tax Neutrality The US really needs to get spending under control. My big fear is the plan would not be tax neutral, and that Washington would take this as a chance to bring in more revenue. Regardless, this talk about "Economic patriotism" and "Corporate Tax Fairness" is complete nonsense. Reflections On Patriotic DutyIf there is a patriotic duty, it should be to pay taxes in accordance with the law. Anything beyond that is ridiculous. Corporations have an even more stringent responsibility to shareholders. Patriotic duty above what is required by law, to the detriment of shareholders, should be (and likely already is) against the law. The correct approach is exactly as I suggested earlier on numerous occasions and Mankiw stated two days ago: Abolish Corporate Income Taxes. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Rebels Claim Liberation of Mariupol Imminent: War Zone Map Update August 13 vs. August 24 Posted: 25 Aug 2014 03:02 PM PDT A lot has happened since Western media reported on August that rebels in Donetsk were surrounded. Here is the map of major military operations from my August 13 post Multi-Pronged Attack on Donetsk Rebels Likely Within Days.  click on map for sharper imageLegend- Blue jets inside red circles are locations where Ukrainian military planes are confirmed to have crashed after being shot down. (This is only for the period of the map, August 1-10.
- Blue jets shooting into blue circles are locations of Ukrainian air raids, again just for the period August 1-10.
- Blue circles with "X" inside them are Ukrainian artillery strikes.
- Red circles with "X" inside them are rebel artillery strikes.
- Red lines with arrows are rebel advances
- Blue lines with arrows are Ukrainian advances
- Solid red lines (no arrow tips) are rebel defense lines
Current Map of Military Operations Notice the completely different nature of the map. Seven areas in white show places where Ukrainian forces are trapped. On August 13, only one such occurrence. Note the surge in pink on the South end of the map. Rebels claim Mariupol is about to be liberated by forces under Igor Strelkov (the Donetsk defense minister who "disappeared" a few weeks ago.) Mariupol in PanicColonel Casad reports Mariupol in Panic. Here is a Google translation. If a better translation comes in from Jacob Dreizin I will update this blog. August 25, Mariupol faced a wave of panic. People hastily leave the port city, which temporarily moved not only many of Donetsk, but also employees of Donetsk Regional State Administration Governor Sergei Taruta.
Among the residents are rumors about that tomorrow units from the DNR [Donetsk People's Republic - aka rebels] will take the city.
"At first we wanted to check in Dnepropetrovsk, but there, they say, the city is already overcrowded refugee housing even money can not you take off. Let his family to go somewhere in the center of the country, where - still do not know. Stations today are simply full of people with trunks all say that tomorrow will be in the DNI "- said,"Vesti "Valery from Donetsk.
Fighting near Novoazovskiy, cutting the track Novoazovsk-Mariupol, fighting under Sedov, all this caused a hysterical reaction and began to flee the active supporters of the junta in Dnepropetrovsk. And at the junta here considering escaped from under Ilovaysk punitive battalion "Azov" can have up to 800-900 armed men, and most likely they seriously outnumber militias operating on the outskirts of Mariupol and Novoazovsk. But the suddenness of the threat against the background of low morale parts junta in this sector, generating strong panic in the media and among the local population, who spreads rumors about the imminent surrender of Mariupol and new bumps DNR. In this regard, the panic on the one hand can stay as episodic panic and lead to more serious consequences if local forces junta will not disband before the real and the fictional threat to assault Mariupol. However, the question itself that can be taken Mariupol DNR, says very clearly about how events have changed in the Donbas in recent days.
This breakthrough in Mariupol may be in addition to the military and political implications. In reaching agreement with Akhmetov, control Mariupol will mean that the new state will remain unrecognized large and untouched by the war industries, and Akhmetov will make any effort to restore the ruined DNR.
And a special update on break through Uspenka south to the Sea of Azov. He certainly looks risky because the flank along the border is subject to shocks from the west and it is fairly easy to cut blow mechanized units. And in other circumstances it would have looked like a blatant bit of a gamble zasovyvanie 3 brigades of the junta to the first southern boiler. But as reserves in the junta is not here, and for transferring them from under Perekopa take time (and in this case they need to fight for Amvrosievka), the militia here are offensive in-vacuum (the enemy simply do not), which brings them to the outskirts of Novoazovsk and approaches to Mariupol. Therefore, proper and panics junta commanders and residents of Mariupol - before them rend serious operational crisis to which they were completely unprepared. And for its localization requires time and that the most important reserves. Do hosts here have a few days of his winning time, which you can try to convert the captured city, trophies, military and political successes.
At the same time, do not underestimate the junta, it there are certain forces for the defense of Mariupol and if the junta decides to defend the city, then take it is not as easy as it is to someone might appear in the wake of recent successes. Naturally delighted with our success, we should not indulge in excessive euphoria, the enemy had not yet broken and panic are not talking about the final defeat, and that he is with bewilderment and confusion from happening.
PS. Our source in Mariupol reports people are in panic at the pump line to get out of town.
Joke of the Day
In Mariupol there is no reason to panic "- said Taruta (Governor Don.obl), sitting in the helicopter.
As reported (to be confirmed) in the city is evacuated administration Gauleiter Taruta - take out then, whether in Dnipropetrovsk, then, whether in Kiev. Epicenter ShiftLooking for a more credible source for essentially the same information? If so, perhaps the well-established Ukrainian news site Vesti will suffice. Vesti reports The epicenter of the fighting in the Donbass shifted south of Donetsk regionIn the Donetsk region fighting continues, however, according to recent reports, the battle moved to the south of the region. Resources DNR reported that there are fights under Volnovaha and in the battalion "Dnepr" say that the fighting is taking place in the village Markino. Vesti also reports Mariupol in panic because of the possible capture of the city by DNR. August 25, Mariupol faced a wave of panic. People hastily leave the port city, which temporarily moved not only many of Donetsk, but also employees of Donetsk Regional State Administration Governor Sergei Taruta. Blame the Messenger Curiously, people blame me for these reports. They challenge the alleged biased nature of the maps, even though the first map highlighted a possible Ukraine army surge. My statement from yesterday stands " If these reports are accurate, the Ukrainian forces are in serious trouble." That is not a pro-Putin statement, a pro-Russia statement or anything of the like. It is a simple statement of fact. That said, I do find these sources more credible than anything coming from Ukraine, the Financial Times, or Western mainstream media. March to the SeaOnce again, here is a map of the area around the Sea of Azov (also shown yesterday).  " The Sea of Azov, a northern extension of the Black Sea, is located on the southern coastlines of Russia and Ukraine. Though somewhat difficult to navigate because of its shallowness, significant levels of freight and passenger traffic do flow through the port cities of Berdyans'k, Mariupol, Taganrog and Yeysk." Escape From MariupolI believe the tide in this war has changed in a massive way, and it will change even more if rebels take Mariupol as now appears likely given the scale of recent rebel advances. Questions of the Day- The war was supposed to be over in May, in June, in Jul, and in August. Is it over yet? Is it even close to being over?
- Are the rebels surrounded or are Ukrainian forces trapped?
- When do people stop believing lies from Kiev?
- Was the battle against Federalism worth it?
- Was the destruction in Donetsk, Lugansk, and other places a "small price" in the name of unity and peace? To whom?
Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| French Government Dissolves in Dispute Between PM Valls and Economy Minister Montebourg Posted: 25 Aug 2014 11:47 AM PDT Economy minister Arnaud Montebourg stepped over the line last weekend criticizing the policies of president Francois Hollande. Some sources report that prime minister Manuel Valls gave Hollande a "him or me" ultimatum, but Valls disputes that claim. Regardless, France Thrown Into Political Turmoil After Government Dissolved. France has entered uncharted political waters after the prime minister, Manuel Valls, presented his government's resignation amid a political crisis triggered by his maverick economy minister who called for an end to austerity policies imposed by Germany.
The prime minister, a social democrat who has been compared to Tony Blair, acted with characteristic swiftness in a bid to reassert his authority. His aides had let it be known on Sunday that the economy minister, Arnaud Montebourg, had crossed a "yellow line" for his dual crime of criticising both the president of France and a valued ally.
Montebourg, 51, fired his first broadside in an interview with Le Monde on Saturday and followed up with a speech to a Socialist party rally the following day. In a veiled reference to President François Hollande, he said that conformism was an enemy and "my enemy is governing". "France is a free country which shouldn't be aligning itself with the obsessions of the German right," he said, urging a "just and sane resistance".
He was joined in his criticism by the education minister Benoit Hamon, who on Monday denied that he had been disloyal. A third minister, Aurélie Filipetti, also appeared in danger of losing her job after wishing a "good day" on Twitter to her two dissident colleagues.
Hollande, who is politically weakened with his approval rating at an all-time low of 17%, asked Valls to form a new government "consistent with the direction set for the country", which is expected to be announced on Tuesday. Valls has pledged to stick to a course in which deficits would be cut while the tax burden on businesses would be eased, bringing him into conflict with the left wing of the party represented by Montebourg. The changes have not yet been carried out, unemployment is at nearly 11% and growth in 2014 is forecast to be only 0.5%. Insurrection Forces François Hollande to ActThe Financial Times reports Insurrection Forces François Hollande to Act. François Hollande, a politician renowned for his caution, acted with uncharacteristic speed on Monday to shake up his Socialist government after a weekend of provocative insurrection by Arnaud Montebourg, his most voluble leftwing minister.
The Elysée Palace denied French media reports that Manuel Valls, the uncompromising prime minister appointed only five months ago, had delivered a "him or me" ultimatum to the president, forcing Mr Hollande's hand.
But Mr Hollande was left with little choice after Mr Montebourg – the economy minister – denounced government economic policy and threw in a few unsubtle barbs aimed at the "extreme" austerity championed by German chancellor Angela Merkel.
A rumbling rebellion within Socialist ranks now has a new champion in the form of Mr Montebourg for its call for more demand-side measures and relegation of cutting the budget deficit in the list of policy priorities. By contrast, on the mainstream centre-right – and from the EU – there is pressure to go further and faster in implementing structural reforms.
Meanwhile, the far right in the form of the National Front, led by Marine Le Pen, threatens to build on its success in winning the European parliamentary elections in May with its populist calls for both tax cuts and sustained public spending.
Mr Valls' first task when he forms his second new government since April is to win a parliamentary vote of confidence – followed by a vote on the 2015 budget due to be tabled in September that will contain more than €20bn in spending cuts.
The Socialist rebels could put this in jeopardy if they choose to vote against the government. But Mr Hollande and Mr Valls are clearly betting that the dissidents will stay their collective hand faced with the alternative: a dissolution of parliament that would lead to a certain Socialist defeat in new elections and the prospect of a centre-right government ruling in "cohabitation" with Mr Hollande. Socialists can easily take down parliament in a vote of confidence. Will they? Hollande is going down in flames at the end of his term regardless. Might the socialists prefer to get some of this out of the way now? That's what it all boils down to. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
