REVEALED: IKEA''s tax avoidance - more complicated than its flat-pack instructions?

A new report commissioned by the Greens in the European Parliament has revealed that furniture multinational IKEA has dodged €1 billion in taxes over the last 6 years using onshore European tax havens.

IKEA is using a series of tax loopholes in different European countries, namely the Netherlands, Belgium and Luxembourg, to avoid paying taxes. Molly Scott Cato MEP, a member of the European Parliament’s special committee on tax, said:

Just like its flat-pack furniture, assembling a tax dodge is simple if you know the right tricks. And it’s easy to tuck away out of site where tax administrations will barely notice it. This report deconstructs the massive scale of IKEA’s tax avoidance practices. 

Ikea Bremt Park

This is a company which is held in some affection by British people, so what is revealed will come as a shock to many and risks damaging IKEA’s reputation with UK customers. It is time that corporations such as IKEA realised that being an ethical company goes beyond checking the credentials of suppliers and treating your staff well. Complex tax avoidance schemes are unethical and British people expect companies to pay a fair share of tax to fund the services they rely on.

Scott Cato  has joined other Green MEPs in signing a letter to the EU competition commissioner, Margrethe Vestager, and tax commissioner, Pierre Moscovici, presenting the report as evidence and urging the Commission to carry out a further investigation to verify possible infringement of EU law. Molly said:

This cynical ‘tax hopping’ is reprehensible and we want the European Commission to fully investigate if and how it infringes on EU law, and take action to address this. EU finance ministers, for their part, should work immediately on trying to recoup the tax revenues, which have been denied to them.

Greens also say that a Corporate Tax Package published by the European Commission at the end of January will not go far enough in preventing IKEA using its different tax loopholes. Molly concluded:

There is an urgent need to change the regulatory framework which facilitates corporate tax avoidance in Europe. We badly need public country-by-country reporting rules for all sectors to provide transparency and ensure the tax strategies of corporations can be properly scrutinised. 

We also need a minimum corporate tax rate to end the race to the bottom of tax dumping in Europe. Such measures require the active cooperation of EU governments and most have so far shown no enthusiasm for truly tackling corporate tax avoidance.