By Melanie Jacob
Journal Editor
It's not the first time and it probably won't be the last that Tim Hortons might be usurped. Burger King has officially announced that it has plans of merging with the coffee conqueror. If the deal goes through, it will be the second time in as many decades that one of Canada's most iconic brands has another bite taken out of it by a foreign company. So what does this mean for Canadians?
It means it's only a matter of time before enough bites finish the doughnut.
That's right. Canada is slowly losing the very thing that makes Tim Hortons such a success here at home. It's not the taste of coffee alone that keeps drawing in those Timmie-devotees (it might also be the cheapness); it's the successful branding the company underwent to promote itself as a Canadian staple. It isn't a coincidence that this promotion happened right after the Wendy's fiasco, either.
In 1995, Wendy's bought Tim Hortons and the Canadian public was in an uproar. After much controversy, Tim Hortons was eventually self-sufficient enough to become independent. It sold many of its shares and repatriated itself by 2009. Now, they're about to go through that whole rigmarole again and the Canadian public is getting tired of it.
In a business sense, it's fine that Tim Hortons wants to diversify globally, but partnering with a foreign company that will gobble up the majority of Tim's shares is tantamount to being anything but Canadian. What makes it worse is that not only will an iconic American-brand restaurant own Tim Hortons, but it's also majority-owned by 3G Capital, a BRAZILIAN company.
In other words, Tim Hortons is becoming a courtesan for sale to the highest bidder.
Should this deal go through, the Canadian coffee giant would lose the core of success that helped it outrun every other coffee outlet in the country. If it's no longer a Canadian icon, what's there to draw people? It's certainly not the bean blend alone since they changed suppliers a while ago and people hardly noticed. In fact, McDonalds acquired Tim Hortons' old supplier, which could be why they've been quickly catching up as a quality coffee provider. Plus, it doesn't hurt that they have a cheap coffee-and-muffin deal.
And let me just say that it's not that Canadians are so "desperate" for an icon that they'll fight for Tim Hortons. (Well, that might be part of it. What's wrong with trying to keep something with homegrown roots domestically owned?) The truth is Tim Hortons needs to stay domestically owned for its own sake, not for ours. All that big talk about it being the "Canadian drink" would become empty words.
And what made this all possible? Canada's lax corporate tax rates.
Don't worry, I'm not about to dive into a complex debate about the United States' corporate taxes versus ours, but I would be remiss not to mention the contentious issue of the tax inversion scheme relating to the Timmies takeover.
To clarify for those who are confused, Burger King is trying to lay claim on our home turf because we have cheaper corporate taxes than the United States (15 per cent versus 35 per cent). By basing their "domicile" here, they can claim Canada's tax rate for all operations in and outside of Canada. That's not to say they won't be paying American taxes; the United States just won't get to tax any foreign profits. Depending on your perspective, some might call that unpatriotic and cheating the system.
Either way, the loss of foreign taxes is the United States' problem, not ours. Our concern is the fact that our tax rate is encouraging American businesses to move here, which gobbles up Canadian businesses such as Tim Hortons. We're becoming a subsidiary of the United States (and other countries that own majority shares of American companies, such as 3G Capital), which increases foreign interest. As it stands, the only way for the Canadian government to fight back (if they're so inclined) is by blocking foreign takeovers with the Investment Canada Act. Or they could just try raising the corporate tax rate, but that seems unlikely.
At the end of the day, the simple truth is that Canada stands at the precipice of once again losing a beloved icon. With this being the second time, I wonder if Canadians really care anymore?
