Ikea tax breaks are under investigation by the European Commission. Ikea seems to have been given tax breaks that enable them to compete unfairly with local European furniture stores. Not only does Ikea have the benefit of size, buying power and name recognition, but it also seems to have been given tax considerations not offered to smaller firms.
This is not just restricted to Ikea. It just one of the retail giants that the EU is aiming for. The European Competition Commissioner, Margrethe Cetager also has her sights set on Amazon, Apple and MacDonald’s. It has been established that Apple’s tax breaks totaled £11.5 billion ($15.4 billion) giving the company an unfair advantage of the other UK and European retailers.
Ikea Tax Breaks May Breach European Union Rules
The corporate tax structure of Ikea is to be scrutinized by the European Commission for unfair tax arrangements allowed to it by the Netherlands. It may be that the tax arrangement between the Netherlands and Ikea breach the European Union’s regulations relating to state aid. These regulations state that and tax benefits offered to one multinational company must also be available to all other companies.
At least two tax rulings by the Dutch authorities appear to have given Ikea an unfair advantage over other firms. According to Ikea, its taxation had been carried out according to EU regulations. According to the European Commission, the Ikea tax breaks case relates to Inter Ikea, based in the Netherlands. This company operates the Ikea business franchise in Holland.
Inter Ikea Moving Untaxed Revenue to the Low Tax States
It is claimed that a 2006 Dutch tax ruling enables Inter Ikea to pay a large sum for an annual license to another Ikea unit in Luxembourg where that sum was not taxed. This was deemed illegal in 20111, upon which Ikea then came to another arrangement with the Netherlands, whereby it could move a large portion of its untaxed franchise profits to Lichtenstein, where the tax rate is lower.
Ikea Tax Breaks Unavailable to Small Companies
Smaller companies have no chance of using this method of transferring taxation to EU members with lower taxation levels. The EU has therefore decided to check the legality of this. The European Commission recently ordered member countries of the EU to collect back taxes from Amazon, Apple, Fiat and Starbucks. These so-called ‘unpaid’ taxes total billions of dollars. This is sure to affect market prices of such multinational firms. Ikea tax breaks appear to be illegal but the investigation will decide.
