Fiscal optimisation

Money flowing through tax havens and shady foundations, thanks to IKEA

by Rachel Knaebel

Holdings, foundations and subsidiaries all around the world, all entangled in complex structures: the owners and managers of the Swedish multinational IKEA are expert at cultivating obscurity and concealment, and they seem to have a fondness for tax havens and tax-‘optimising’ financial arrangements: i.e. avoiding tax as much as possible. Rachel Knaebel digs into this financial maze, so remote from the philanthropic ideas promoted by IKEA’s founder.

This article was originally published in French. Translation: Jocelyn Timperley.

Fancy a waltz down to IKEA to modernize your kitchen or furnish your new apartment? Your stroll through one of France’s twenty-nine gigantic stores will end in a tab that may put a strain on your holiday budget. But don’t worry, your money, at least, is going to travel: a one-way ticket to the Netherlands, a stop-off in Luxemburg, a passage to Liechtenstein, maybe even a sunny stay in the Netherlands Antilles, to then finally land in Switzerland in the pocket of IKEA’s founder, Ingvar Kamprad. And thanks to these multiple ramifications, his group will only be paying a minimal amount in tax. This is the complex pathway analysed by Attac Germany in a recent report on the Swedish transnational corporation.

Last July, IKEA (just like Apple and Facebook) flatly refused to be auditioned by the information commission of the French National Assembly on corporate tax optimization. The Swedish giant prefers to cultivate secrecy. The concept? Double-bottomed drawers, secret cupboards and fiscal mazes. Behind the IKEA brand lurk several holdings, foundations and a host of subsidiaries. According to Attac Germany, this complex organisational structure, which encompasses branches throughout Europe from Liechtenstein to Luxembourg, allows IKEA to practise tax optimisation on a grand scale, resulting in a far more complicated maze than the arrow-directed walk inflicted on customers at its stores.

A Fortune Settled in Switzerland

To start with, IKEA founder Ingvar Kamprad uses an obvious trick to pay less tax: living in Switzerland. The 88-year old entrepreneur has lived there for several decades; pretty handy for someone with one of the largest fortunes in the world (according to Forbes rankings). Of course, officially, Ingvar Kamprad is not the owner of IKEA. He hasn’t been the head of the group since 1988 and left the chairmanship of the Supervisory Board in 2006. But he remains ‘Senior Advisor’ of the Supervisory Board of Ingka, one of the group’s holdings, where he’s also given positions to his sons. "In practice, he controls the group through one of IKEA’s companies, Inter IKEA, in an indirect but still effective and autocratic manner," says Attac report.

Inter IKEA is one of three holding companies owned by the group. At the top of the pyramid is Ingka, parent company of all the others, headquartered in the Netherlands. This holding, however, is 100% owned by a foundation, Stichting Ingka, also in the Netherlands. Wait: a foundation at the head of a corporation with a €28.5 billion turnover in 2013? Seems rather peculiar… It allows the founder of IKEA to protect himself from a company takeover by external buyers, but it also provides protection, it seems, from tax authorities.

A first foundation in the Netherlands

As a foundation, Stichting Ingka is considered a non-profit: “How the management of a furniture manufacturer and retail chain can be an activity of public interest remains the secret of the Dutch tax authorities," says Attac. Perhaps offering cheap furniture and inspiring millions of people to start DIY are in the public interest…? In any case, Ingka Foundation has assets worth €36 billion, making it one of the richest in the world.

"In the Netherlands, the income of a charitable foundation that comes from a business activity is subject to corporate tax,” says Karl-Martin Hentschel, author of the report. “But this doesn’t apply to other investment income and assets of the foundation, likely to amount to €17.9 billion in liquid assets and securities for Ingka Foundation.” And the foundation’s legal status has another upshot, further reinforcing the fogginess surrounding IKEA’s finances: "The Ingka foundation is not required to publish an annual report. There is also secrecy at this level."

A second foundation in Liechtenstein

In practice, it is another foundation, the IKEA Foundation, owned and financed by the first, which implements the philanthropic activities of the group. The funds of the parent foundation are thus "used in two ways, either reinvested in the IKEA group or donated for charitable purposes through the Stichting IKEA Foundation," explains the furniture manufacturer’s British website. It’s up to still another, third foundation, Imas, to manage Ingka’s financial assets, not to mention the many Ingka subsidiaries: Ikea Industry, Swedwood, Swedspan, Ikea Food Services for restaurants, Ikea Trading Services...

Lost already? Somewhere between the kitchen area and the bedroom section, the second large branch of the furniture manufacturer remains to be explored: Inter IKEA Group. Although legally independent of the Ingka group, the two operate under the same brand: IKEA. And under the same model as Inkga, Inter IKEA is likewise owned by a foundation, which goes by the name of Interogo. This one is based in Liechenstein, tax haven in the heart of Europe. The principal object of this organisation is not to work for the public interest but, as Ikea explains, “to own and govern Inter IKEA Group and to invest in Inter IKEA and thereby in the further expansion of the IKEA Concept, in order to secure the independence and the longevity of the Group and the IKEA Concept.

Evidently, longevity requires tax optimisation. According to 2011 research of Swedish television channel SVT, in twenty years the foundation will have allowed Interego founder Ingvar Kamprad to save between 2.3 and 3.2 billion euros in tax. [1]

A third company in Luxemburg, with a subsidiary in the Netherlands

The third extension of IKEA’s yellow and blue tentacles is the Ikano Group. Founded in 1988, Ikano Group is owned by Ingvar Kamprad’s three sons. Based in Luxemburg, it has half a dozen branches and more than a dozen subsidiaries worldwide and looks after financial management, banking, insurance, property management… Among its subsidiaries is Ikano Capital, an asset management company based in Switzerland, and a branch of the insurance company Dutch Nordic Insurance, based in the tax haven of Curacao, Netherlands Antilles.

So how much do all the branches of the Swedish furniture giant actually pay in taxes in the end? Attac Germany attempted the calculation. In 2012, the parent company Ingka Group paid €695 million in income taxes [2], which corresponds to a tax rate of 17.8%, well below nominal corporate tax rates in most of Europe. For Inter IKEA Group, taxes paid the same year amounted to €58 million. This corresponds to a maximum tax rate of 11.6%. "There are no figures available on the taxes paid by the Ikano Group," said Attac.

According to the French Socialist MP Pierre-Alain Muet, rapporteur to the French National Assembly on corporate tax avoidance, IKEA has refused to be interviewed on the grounds that they “unfortunately, [it doesn’t] have expertise in this highly technical field.” An argument “either improbable or troubling for a company this size,” Muet responded. Given the complexity of the group’s organization, lack of visibility seems to be an integral part of the IKEA business model, so much so that its executives themselves, and above all the tax authorities, lose the plot.

"For us, the children are the people who matter most in the world," IKEA Foundation proclaims. But obviously they don’t matter enough for IKEA to pay its fair share of the taxes that finance education and public health.

Rachel Knaebel

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Photo : The Isle of Wight ferry Red Osprey, in her IKEA livery. Source