On Friday February 12 a report commissioned by the Greens/EFA Group in the European Parliament lifted the curtain on the tax avoidance practices of IKEA. This report, also known as the IKEA report, gives a clear insight on how a large international corporation like IKEA can use the taxation rules in the EU to its benefit. IKEA managed to avoid an estimated sum of €1 billion over the course of 6 years.
By meticulously setting up a corporate web of organisations, utilizing complicated structures, sister companies, monetary transfers and secret beneficiaries, IKEA dodged taxes. In essence, this is a system designed to avoid taxation. They simply analysed the lacking taxation system that is currently in place in the European Union and abused its weaknesses. Through internal financial transactions such as; paying royalties, interest, or other charges to its sister companies and subsidiaries, IKEA managed to make use of different taxation rates. The main countries they use for these kind of transfers are Holland, Lichtenstein, Luxembourg and Belgium. By doing so IKEA managed to manoeuvre itself in such a way it avoided a large portion of its income taxes.
The worst part is that IKEA isn’t actually doing anything illegal. This very basic fact is what lies at the heart of the problem. Current regulation is severely lacking when situations like these have the space to occur. To us it’s clear that the Anti-Tax Avoidance Directive, which was published in January 2016 is insufficient. The core message for this Directive was the idea that all companies have to pay their taxes where they make their income. The IKEA report shows that these measures do not cover enough ground to combat this type of avoidance.
In light of these revelations, we call to improve regulations even further. There should be an improved anti-avoidance package that takes into account these kind of constructions. That way additional loopholes in the system can be closed. Member states should also be willing to take additional measures that truly work towards tax justice in Europe. We also plead for a greater amount of transparency. Public country by country reporting and full disclosure of tax deals negotiated between national governments and large companies is essential in order to have a true transparent market. Furthermore, we urge all member states to adopt a Common Consolidated Corporate Tax Base (CCCTB) in order to stop the internal tax war which is going on today within the borders of the EU.
Our stance on these affairs has always been clear: each needs to pay their fair share. There is still too much burden on medium and low income groups. Large corporations are getting tax deals and are not paying what they should. We have and will always support a common offensive against tax evasion, tax avoidance and tax havens. A common European approach to corporate and wealth taxation is essential in order to strike a balance and have fair taxation in the European Union.
You can read the full IKEA report by clicking here.