An analysis of the purchase of Anheuser-Busch, producer of America’s most iconic brew, by the Belgian firm InBev reveals there was more to the deal than a handsome payday for shareholders.
According to the Tax Foundation, Belgium’s corporate tax rate is 33%, but the effective tax rate can be half the nominal rate thanks to adjustments for something the OECD calls a “notional allowance for corporate equity.” Bottom line: InBev was paying around 20% of its profits in corporate taxes, compared to Anheuser-Busch’s rate of 38.4%.
Things have gotten pretty bad when U.S. companies relocate to Europe to cut their tax payments. But a research analysis by Morgan Stanley finds the combined company’s corporate tax bill will be lower than in the U.S. and that the tax differential indeed figured into the economics of the sale.
So while John McCain may have benefited from his wife’s ownership of Anheuser stock (estimated at between 40,000 and 80,000 shares), the country will continue to see its competitive edge wither away without a corporate tax rate cut. Mr. McCain to his credit wants to cut the corporate tax rate to 25%, close to the global average. Senator Obama is more interested in raising tax rates than cutting them.
Does the Anheuser-Busch deal represent a precedent? Maybe not. Milller Brewing, long a Milwaukee fixture, is majority owned by SABMiller, the “S.A.B.” being South African Breweries.
Is there more of this to come? With Obama in the White House? Yes and definitely yes.
Wall Street dealmakers tell us to expect more sales of U.S. companies to European rivals thanks to the combination of America’s higher corporate taxes and the weak dollar. They’re right. New data from the OECD for 2008 indicate that the international average for corporate tax rates fell by another percentage point last year, meaning the U.S. is pricing itself out of the market as a corporate headquarters.