
How IKEA is structured to minimize tax and maximize control - widgetycrank
http://www.economist.com/node/6919139?story_id=6919139
======
forgottenpaswrd
"FEW tasks are more exasperating than trying to assemble flat-pack furniture
from IKEA"

Am I the only one that enjoy assembling flat-pack furniture and believe it is
extremely easy?.

~~~
dagw
I've bought some flat-pack furniture from some of IKEA's competitors. After
having struggled through putting that together I have to say I have new found
respect for the amount of thought and design IKEA must put into how their
furniture goes together.

~~~
moomba
Never bought any furniture from Ikea. The furniture I have bought from other
low end places generally has very low res and out of proportion drawings. Its
not a crazy conspiracy that the manuals are not very well put together. If you
think about it economically, they already have your money by the time you've
opened the box and tried to piece your furniture together.

~~~
dagw
If you think about it economically they only have a tiny fraction of my money.
Sure they have the $60 I just spend on a new side table, but they don't have
the countless thousands I'll be spending on a new bed, bookshelf, kitchen,
dining room table etc. etc. over the next decade. Why on earth wouldn't they
want to try to grab that money as well.

~~~
eli
Low end furniture competes on price more than brand. If you bought a really
cheap side table, they know you'll probably but a really cheap bed -- whether
it's made by them or not.

------
wallflower
To be fair, Ikea founder Ingvar Kamprad just recently admitted (2011) to the
existence of the ownership foundation.

> In an email from Ikea sent to the TT news agency, Kamprad admits that the
> Interogo Foundation in Liechtenstein exists and that it owns Inter Ikea
> Holding SA, which in turn owns Inter Ikea.

"Interogo Foundation is a company foundation whose only goal is to invest in
the expansion of the company business and secure its long-term survival. In
other words, the assets of the Interogo Foundation are held as financial
security and are only used if Inter Ikea has financial difficulties," wrote
Kamprad.

"The assets can also be used to support individual Ikea dealers who have
financial difficulties or for philanthropic purposes. Interogo Foundation is
controlled by my family and is administered by a board of directors consisting
only of outside representatives." he added.

<http://www.thelocal.se/31650/20110126/>

------
vitobcn
This is a pretty common scenario for international companies. Maybe most of
them do not go as far as IKEA and lock their whole corporate structure, but
most of them manage to achieve pretty low corporate tax rates. As an example
Google was estimated to achieve an effective tax rate of only 2.4% [1]

[1] Source: [http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-
sho...](http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-
how-60-billion-u-s-revenue-lost-to-tax-loopholes.html)

~~~
bryanlarsen
It says right in the article that Google's effective tax rate is 22.2%. It
pays 2.4% only on a small part of its income.

------
ebaysucks
Love it. Makes my furniture cheaper.

The only thing unethical about it is that these tax avoidance schemes have
inherit economies of scale - startups can't afford the advice.

The solution is not to eliminate the tax paradises (which would cause a
revolution btw), but to eliminate the tax code altogether.

If your ideology insists on coercion than at least make it a flat rate.

Edit: I get accused of supporting corporatism below. I don't. I just support
anyone to avoid taxes as much as possible and oppose all forms of
collectivism.

~~~
xtho
I generally enjoy reading hn but such right wing ideologies make me feel sick
in the stomach.

Please take into account when making such statements the US (or whereever you
live) is not the world. And just because you got brainwashed after decades of
conservative government doesn't mean the rest of the world is. But the rest of
the world also participates in this community.

~~~
endtime
I generally enjoy reading HN, but reddit-style thought-policing like this
makes me sick to _my_ stomach.

The guy's not a rapist or a neo-Nazi, he's just not a socialist. Get over
yourself.

~~~
davidw
This whole thread is EXHIBIT A of why there should be no politics here.

~~~
hugh3
And the fact that this comment was modded up to eight "Waaaaah, your ideology
makes me sick" is a sign that things have gone way off the rails.

I'm gonna set my noprocrast to 87000 minutes now and come back in two months.

~~~
davidw
People's ideologies _do_ make other people angry though. Which is why they
should be aired on other sites.

~~~
nika
IS that the fault of the minority who thinks different and then angers the
majority?

Or is that he fault of the majority who is so sensitive it cannot tolerate a
minority that doesn't agree absolutely completely?

~~~
davidw
I don't care - I just don't want to see these endless debates here. They are
always the same and go 'round and 'round and nothing is ever accomplished
other than pissing people off.

------
mmmmax
What's with posting articles from 2006? There are more recent sources with
updates, including from FT.com (behind a paywall) and the investigative
documentary about this which aired last week in Sweden:
[http://translate.google.com/translate?hl=en&sl=sv&u=...](http://translate.google.com/translate?hl=en&sl=sv&u=http://svt.se/2.150075/1.2304474/granskningen_av_ikea_ett_brett_samarbetsprojekt)

~~~
vampirical
This the ft.com article you're referencing?
[http://const.it/dewall/http://www.ft.com/cms/s/0/2437643c-29...](http://const.it/dewall/http://www.ft.com/cms/s/0/2437643c-2985-11e0-bb9b-00144feab49a.html)
(link bypasses the paywall)

I personally prefer the economist article. I read it back in 06 and I've read
a few more on the Ikea tax setup since then. It seems to still accurately
represent the situation, some numbers might be out of date but the gist is the
same. That ft.com article is a bit sparse, seemingly written as an update for
people already aware of the issue, and as you say paywalled.

Thanks for the additional and up to date info though.

------
toadi
They should come to Belgium. We have something called 'notionele interest
aftrek'
([http://www.kpmg.com/BE/en/Whatwedo/Interests/NotionalInteres...](http://www.kpmg.com/BE/en/Whatwedo/Interests/NotionalInterestDeduction/Pages/default.aspx)).

As an example:

Suez Tractebel, Energy Europe Invest en GDF Suez CC had a profit before tax :
4,8 bilion euro.

Together they payed 2,3 milion euro tax. This is a tax rate of 0,049%.

Oh these are the Gas & electricity companies in Belgium.

------
cschmidt
I always think of that when I see a PBS show like NOVA, sponsored by the
Howard Hughes Medical Institute. At one time, they owned Hughes Aircraft,
mainly as a tax dodge for Howard Hughes. The tax dodge has long outlived the
company.

<http://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institute>

------
jimmybot
What's terrible about IKEA's whole tax avoidance scheme is that it gives an
unfair advantage to IKEA over Target, Walmart, etc. who are all presumably
paying expected amounts of corporate tax and additionally, by virtue of being
public companies, provide a great amount of transparency versus IKEA.

Another example of a business built in part on a tax loophole--Amazon.com and
its online brethren whose customers generally don't pay sales tax. That's a
huge, unfair retail advantage compared to Barnes & Noble and other brick-and-
mortar stores, especially since retail margins are generally so thin.

~~~
loewenskind
>gives an unfair advantage to IKEA over Target, Walmart

Ugh. You correctly note that tax avoidance is an unfair advantage but list
among your victims some of the biggest companies in the world. Do you think
_Walmart_ is at a disadvantage? They almost certainly avoid _more_ taxes than
IKEA (if nothing else, because they make a lot more money).

When Adam Smith wrote about "the invisible" hand, he noted that it would only
work if companies weren't allowed to grow too large. Once a company gets big
enough it no longer has to participate in the market. Massive tax avoidance is
just one of the many ways that companies like Walmart can use their size and
power to keep small players out.

~~~
lionhearted
> When Adam Smith wrote about "the invisible" hand, he noted that it would
> only work if companies weren't allowed to grow too large.

Citation? I've read most of Wealth of Nations, and I recall Smith spending a
lot of time on monopolies - where the monopoly can constantly undersupply the
natural demand, and charge premiums because of it.

But I didn't recall anything about companies becoming too large... in fact, he
wrote famous defenses of companies like East India importing, so long as they
didn't receive exclusive (monopoly) trade rights. That was one of the larger
companies of the day.

But Smith wrote a lot, so I might've missed it. Cite?

~~~
loewenskind
I don't have my sources handy, but this:

>he wrote famous defenses of companies like East India importing

Sounds wrong to me. There is some discussion of it here:
[http://adamsmithslostlegacy.blogspot.com/2011/01/claims-
for-...](http://adamsmithslostlegacy.blogspot.com/2011/01/claims-for-
invisible-hand-fail-simple.html)

"Also chartered companies were well known as witnessed by Adam Smith’s
negative assessment of chartered companies in general and the East India
Company in particular, contained in the Wealth of Nations."

------
sudonim
The story would be much different if Ikea's owners were American.

American citizens don't have the same affordances as foreign nationals when it
comes to tax minimization. If these foundations for Ikea were majority owned
by Americans, they would be subject to taxation by the IRS, regardless of in
which country they were created.

~~~
hippich
If you are big enough and you do not rely only on US market - change country
where you live.

------
bound008
This is an amazing write-up i read to counteract the piece about google's tax
avoidance... I had to find it on another site though, how do you get the link
to go around the paywall?

------
ashbrahma
Google cut its taxes by $3.1 billion in the last three years using a technique
that moves most of its foreign profits through Ireland and the Netherlands to
Bermuda (Double Irish).

