EU targets Ikea’s Dutch tax deals

Bloomberg

Ikea is the latest company ensnared in the European Union’s sprawling tax probes as regulators look at whether the retailer’s revenue deals in the Netherlands allowed it to avoid hundreds of millions of euros of taxes.
The tax breaks may have given Inter Ikea Group, which operated the Swedish furniture maker’s franchise business, an unfair advantage over rivals, the European Commission said. It will probe a 2006 deal on how Ikea calculates a license 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 EU Competition Commissioner Margrethe Vestager has received for focussing on how US companies reduce taxes. She’s already ordered Apple Inc., Starbucks Corp. and Amazon.com Inc. to repay tax while a probe of McDonald’s Corp. is continuing. She’s also suing Ireland for delays in reclaiming about $15.3 billion from Apple during the appeal process.
Ikea may have avoided at least $1.2 billion in tax from income from stores from 2009 to 2014, according to a report by Greens/EFA lawmakers submitted to the EU. Vestager said in 2016 that the EU was vetting those claims.
“Europe shows its teeth,” said Sven Giegold, a German Green member of the European Parliament. “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.”
Inter Ikea Group said that “the way we have been taxed by national authorities, has in our view been in accordance with EU rules” and “it is good if the investigation can bring clarity and confirm that.”
State aid investigations are a matter between the EU watchdog and concerned nations, Ikea said.
The company said it will cooperate and respond to any questions from the authorities.
At a European Parliament hearing in March 2016, Ikea said its tax affairs are 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 license fee paid to the Luxembourg branch reflects economic reality. Regulators will assess “if the level of the annual license fee reflects” Ikea’s contribution to the franchise business.