Investment guru Warren Buffett has unleashed a storm of controversy in the United States by helping finance Burger King’s merger with Canadian fast food franchise Tim Horton’s.
The problem with the $US11.4 billion ($12.22 billion) merger is the relocation of Burger King’s headquarters to Canada taking advantage of the country’s lower company tax rate.
Canada has cut its federal corporate tax rate to 15% leaving it with a company tax rate of 26% once provincial taxes are added.
This is compared to the United States’ company tax rate of almost 40% (including state taxes), which is the highest in the developed world.
Critics have labelled the deal “un-American” and called for a boycott of Burger King burgers.
But now Canada’s finance minister, Joe Oliver, has called for Australian businesses to follow suit.
“Canada is open for business,” he told Fairfax ahead of an appearance at the upcoming G20 in Cairns.
“So we welcome Australian investment in this country.”
The lure is the low tax rate, although the government promised in the budget to cut Australia’s company tax rate by 1.5% at the moment we are still sitting on a 30% company tax rate.
It may be a bit extreme to relocate to Canada but there are proven advantages to a lower company tax rate.
Reducing the tax burden on businesses increases their productivity, improves their competitiveness and lifts their ability to expand and create jobs.
Australia needs to take a leaf out of Canada’s book and adopt a lower corporate tax rate.
It may seem counterintuitive but the boost in business activity from cutting the company tax rate may result in more government revenue rather than less.
Also a clear message that Australia is open for business is sorely missing at the moment with Senate squabbles continuing to hamper the government’s reform measures.