Ikea Accused of Tax Avoidance in Europe

Swedish home furnishings giant Ikea has become the latest multinational company to be accused of dodging taxes.

A new report from Green Party members of the European Parliament features graphics mocking the style of the diagrams included by Ikea in the assembly kits for its products, showing how Ikea shifts royalty fees and profits to entities in low-tax countries such as the Netherlands, Liechtenstein and Luxembourg.

For 2014, the researchers estimate the tax strategies led to €35 million ($39 million) of missing tax revenues in Germany, €24 million ($27 million) in France and €11.6 million ($13 million) in the United Kingdom. The report estimates that countries such as Sweden, Spain and Belgium are probably losing between €7.5 million ($8.4 million) and €10 million ($11 million) as well.

The company defended its tax policies. “Ikea Group has not received the alleged Green/EPA group report,” said a statement forwarded by spokesperson Mona Liss. “Thus, Ikea Group cannot provide comments on its content. The Ikea Group pays taxes in accordance with laws and regulations, wherever we are present as retailer, manufacturer or in any other role. We have a strong commitment to manage our operations in a responsible way and to contribute to the societies where we operate.”

Ikea noted that it paid €822 million ($922 million) in corporate taxes on a global basis in its fiscal year 2015, an effective corporate income tax rate of 19 percent. Local and other taxes, such as property, business and environmen¬tal taxes together with custom duties, totalled € 700 million ($787 million). Thus, the total tax charge was more than €1.5 billion ($1.7 billion). Ikea also collected substantial taxes on behalf of governments, such as VAT and employee taxes, the company noted.

In explaining its finances, the statement said Ikea Group, as well as any other Ikea franchisee, pays a 3 percent franchise fee to Inter Ikea Systems B.V., the worldwide franchisor and owner of the Ikea concept. “The franchise fee is an operational cost. The franchise agreement gives Ikea Group the right to operate Ikea stores under the Ikea trademark. Ikea Group has the franchise right to operate Ikea stores in 28 markets. Other franchisees have the right to operate Ikea stores in additional 19 markets worldwide.” All franchisees outside of Ikea Group also pay the 3 percent franchise fee.