Margrethe Vestager, the EU’s competition commissioner, has announced an official investigation into Ikea’s Dutch tax arrangements today.
Vestager said in a statement:
“All companies, big or small, multinational or not, should pay their fair share of tax. Member States cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere. We will now carefully investigate the Netherlands’ tax treatment of Inter IKEA.”
The furniture retailer allegedly avoiding paying nearly €1bn in EU taxes from 2009 to 2014, according to a European parliament report, due to these favourable arrangements.
According to the report, commissioned by the Greens, Ikea set up “a corporate web of organisations”.
It then used internal financial transactions such as paying royalties to its subsidiaries to make use of different tax rates. The company was able to do take advantage of this scheme in Belgium, the Netherlands, Lichtenstein, and Luxembourg.
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“[Ikea] simply analysed the lacking taxation system that is currently in place in the European Union and abused its weaknesses,” said the report.
What will the EU investigation into Ikea do?
The Greens report notes that Ikea didn’t do anything which is actually illegal. Instead, the global corporation took advantage of the lack of regulation in this space.
The EU investigation into Ikea will need to determine if the arrangements did break EU tax rules.
If this is found to be true, the EU Commission will estimate the savings Ikea made from the structure. This will then be used to calculate the appropriate payback.
The EU investigation into Ikea is part of a wider crackdown on corporations avoiding tax in the EU. Last year, Vestager took on Apple, ordering that it was granted undue tax benefits of up to €13bn by Ireland.
Ireland has so far refused to collect the back taxes from the iPhone maker. However, the European Commission has referred the case to the European Court of Justice to impose non-compliance fines on Apple and Ireland.
The commission is also investigation the fast-food chain McDonald’s. The company has reportedly benefited from favourable tax treatment in Luxembourg.
McDonald’s’ European franchise has paid no corporate tax in Luxembourg since 2009, despite earning profits of over €250m.