After the EU executive’s tax hunt to American corporations, it is time for IKEA, the Swedish furniture store to undergo the Berlaymont’s scrutiny, due to possible illegal practices for tax avoidance targeted.
According to the Commission’s competition watchdogs, the Netherlands seems to have given the IKEA franchise subsidiary an unfair advantage over other companies, resulting in a breach of EU state aid rules.
“All companies, big or small, multinational or not, should pay their fair share of tax,” said EU Competition Commissioner Margarethe Vestager on Monday. “Member States can not allow some companies to pay fewer taxes by artificially relocating profits elsewhere can.” Vestager has already made resounding decisions against giants like Apple, Starbucks, Fiat, and Amazon, is also investigating McDonald’s fast-food giant and French energy company Engie.
According to Vestager’s team, IKEA group is said to have saved taxes of €1 billion in the years 2009 – 2014, according to a February 2016 report brought to the European Parliament by the Greens. The report stated that IKEA is said to have built up a network of subsidiaries in the Netherlands, Luxembourg and Liechtenstein.
European Commission’s investigation is based to this scheme and to evidence that a Dutch subsidiary of IKEA has paid intellectual property royalties to a subsidiary in Luxembourg. However, the Swedish company claims that several points of the report are mistaken, but this will not stop the European Commission from clarifying whether Ikea may have received illegal state aid in the Netherlands.
IKEA dismisses allegations
“The way we were taxed by the national authorities is in our view in line with EU rules,” said the Swedish giant on Monday. Inter-Ikea Holding holds the trademark rights to Ikea and, like the Ikea Group owns a foundation. The Group – which is Ingka Holding together with controlled companies – operates as a franchise of 355 furniture stores in 29 countries and pays franchise fees to Inter Ikea. Net income for the 2016/2017 financial year fell sharply from € 4.2 billion to € 2.5 billion as a result of shifts.
The company rather suggests that on the income, € 800 million in taxes have been paid, including other taxes and duties, the total tax burden amounts to €1.3 billion.