Ikea latest firm to face EU tax probe

By Aoife White and Stephanie Bodoni

Regulators are looking at whether the retailer’s revenue deals in the Netherlands allowed it to avoid hundreds of millions of euros of taxes.

The tax breaks might have given Inter Ikea Group, which operated the Swedish furniture-maker’s franchise business, an unfair advantage over rivals, the commission said. 

It will probe a 2006 deal on how Ikea calculates a licence fee paid by a Dutch unit to a Luxembourg branch, where it was exempted from tax. The EU will also look at a 2011 ruling on how the Dutch company paid tax on payments to a Liechtenstein unit.

A probe into Ikea, one of Europe’s best-known brands, may ease criticism that commissioner, Margrethe Vestager, has received for focusing on how US companies reduce taxes.

She has ordered Apple, Starbucks, and Amazon to repay tax, while a probe of McDonald’s is continuing. She’s also suing the Government here for delays in reclaiming €13bn from Apple.

Ikea might have avoided at least €1bn in tax from income from stores between 2009 and 2014, according to a report by Greens-EFA lawmakers submitted to the EU last year. Ms Vestager said, last year, that the EU was vetting those claims. 

“Europe shows its teeth,” said Sven Giegold, a German Green MEP.

“Ikea has been using a series of tax loopholes for years to avoid paying taxes. It is the duty of the European Commission to stop these unfair behaviours and make sure that companies pay their taxes where they make their profits,” he said.

Inter Ikea Group said: “The way we have been taxed by national authorities, has, in our view, been in accordance with EU rules”.

State aid investigations are a matter between the EU watchdog and concerned nations, Ikea said. The company said it will respond to any questions from Dutch authorities or from the Commission. 

At a European Parliament hearing in March of last year, Ikea said its tax affairs were in line with international rules, echoing comments by other firms targeted by EU probes, including McDonald’s and Apple.

The EU will investigate the Dutch tax treatment of Inter Ikea Systems, looking at whether a 2006 tax ruling on an annual licence fee paid to the Luxembourg branch reflects economic reality. 

They’ll also review a 2011 tax ruling on the reorganisation of the company’s tax affairs, looking at whether the price Inter Ikea Systems agreed on to buy intellectual property rights, and the interest paid on an inter-company loan, reflect economic reality.

Bloomberg