Tim Hortons marks return to Canada; Harper credits low corporate taxes

OAKVILLE, Ont. - The repatriation of the Timbit was held up by Prime Minister Stephen Harper and Tim Hortons executives Wednesday as a shining example of low corporate tax rates luring business to Canada.

OAKVILLE, Ont. - The repatriation of the Timbit was held up by Prime Minister Stephen Harper and Tim Hortons executives Wednesday as a shining example of low corporate tax rates luring business to Canada.

But at least one critic found the news hard to swallow when consumers will soon be paying more for coffee in two provinces that are merging sales taxes with Ottawa.

The homegrown coffee giant has not technically been a Canadian company for years, but Tim Hortons Inc. (TSX:THI) is reorganizing as a Canadian public company after 99 per cent of shareholders voted Tuesday in favour of bringing the iconic coffee company back home from the U.S.

The chain so ubiquitous north of the border had been registered in Delaware for nearly 15 years as a result of its purchase by U.S. burger chain Wendy's in the 1990s.

At an event at the company's Oakville, Ont., headquarters, west of Toronto, Harper credited lower corporate taxes for luring Tim Hortons back to the Canadian fold.

"This decision, ladies and gentlemen, is all about the bottom line, and the bottom line is that Canada is now not just a great place to live, it's a great place to invest and to do business," said Harper, who admitted earlier he doesn't really drink coffee.

"I drink about six cups a year," he said, sipping a hot chocolate.

Harper said his government had already lowered the general corporate income tax rate to 19 per cent from 22 per cent, and that it will fall to 15 per cent by 2012.

But New Democrat MP Olivia Chow questioned the logic of lowering corporate taxes for companies such as Tim Hortons, while increasing taxes in some parts of the country on the coffee itself.

The party is critical of the move to harmonize sales taxes in B.C. and Ontario, which would see some everyday items that were previously exempt start being taxed.

"Helping corporations is one thing, it's fine, but spending $6 billion of our tax dollars to get the provinces like Ontario and B.C. to do a big tax grab every time we buy a donut, drink a coffee, buy a newspaper, get a haircut, take the pet to the vet - that's mean," Chow said.

Tim Hortons chief financial officer Cynthia Devine said it's hoped the reorganization will improve efficiency, growth and competitiveness.

"Finally, this reorganization will help Tim Hortons align itself to continue to take advantage of lower Canadian tax rates," she said.

"These lower tax rates help us and companies like us keep more capital at work and achieve our priority in reinvesting in the business for future growth in our company."

Tim Hortons, founded in the mid-'60s by Cochrane, Ont.-born hockey legend Tim Horton, became part of Wendy's in 1995, forging a partnership led by Wendy's founder Dave Thomas that saw the restaurants sit side-by-side at many locations.

After Thomas died in 2002, the two companies started to drift apart, with the doughnut chain choosing to focus on sandwiches and other breakfast and lunch options. The concept clashed with offerings from the Wendy's brand.

In 2006, the company was spun off into its own American entity, though its corporate headquarters remained in Oakville and most of its stores are in Canada.

Since then, the chain has struggled to boost sales in the United States despite thriving in Canada.

It has been a publicly traded company, listed on the Toronto and New York stock exchanges, since Wendy's first began to spin off its shares.

Shareholders will hold the same amount of stock as before, and the company will continue to operate under the Tim Hortons name with stock listings on the TSX and the New York Stock Exchange.



Prime Minister Stephen Harper takes a sip of his hot chocolate while visiting a Tim Horton's in Oakville, Ontario on Wednesday September 23, 2009. THE CANADIAN PRESS/Frank Gunn

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