Profit not tax evasion: Why Buffett is investing in Burger King's Tim Hortons deal

Berkshire Hathaway’s chairman and CEO, Warren Buffett, is helping finance Burger King Worldwide Inc’s take over of Canadian chain Tim Hortons Inc, raising questions over whether he’s merely helping the USfast food giant evade taxes despite his well documented stance on higher taxes for the rich.

Buffett is lending Burger King $3 billion in the form of preferred stock at a lucrative 9 percent interest rate for it to complete the $11.4 billion deal for Tim Hortons.

The Canadian coffee and doughnut chain and US fast-food company Burger King have confirmed to Reuters that they were discussing a merger, and investors and analysts said the deal was spurred in part by Canada’s attractive tax policies.

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Burger King’s plans to move its headquarters to Canada may be a move to cut its tax bill in the deal. This is sometimes referred toastax inversion–a mechanism by which companies based in the United States change domicile to lock in lower tax rates.

So the question is: given Warren Buffett’s well publicised stance on higher taxes for the rich why is he helping Burger King lower its taxes?

While both Burger King and its owner, Brazilian private-equity firm 3G Capital, have saidthe deal is for growth opportunities and not tax benefits, a New York Times report also notes that the deal may not be a case of tax inversion and notes that it may just be another profitable use of money by the multi-billionaire.

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The report points out that though the new parent company will be based in Canada it won’t really be get much of a tax benefit and its tax rate it faces won’t change.

Meanwhile, website Stocks.orgalso points out that the deal is not abig deal for Berkshire as it already has investments worth over $55 billion in the US.

“One of the many other reasons for Buffet’s involvement is the protection of Berkshire’s ownership in Coke (KO) which is 9.1%. Burger King Worldwide Inc,” it notes.