Ikea's tax affairs to be investigated by the EU

The European Commission is to open an in-depth investigation into Ikea's corporate tax structure.

The Commission said Dutch-based Inter Ikea, one of the Swedish giant's two divisions, may have been given unfair tax advantages by the Netherlands.

European Competition Commissioner Margrethe Vestager said all firms "big or small, multinational or not, should pay their fair share of tax".

The EU will look at whether Ikea's tax affairs breach EU rules on state aid.

Under EU law, member states cannot give selective tax benefits to multinational groups that are not available to other firms.

"The Commission has concerns that two [Dutch] tax rulings may have given Inter Ikea Systems an unfair advantage compared to other companies," it said.

The move is the latest crackdown by the EU competition authority on tax deals between EU countries and multi-nationals.

Two tax deals

The Commission's Ikea inquiry is focused on two tax agreements between the Netherlands and Inter Ikea which it alleges "have significantly reduced" the firm's taxable profits in the Netherlands.

Netherlands-based Inter Ikea operates the franchise business of Ikea. It collects royalties from other parts of Ikea and pays little tax on the proceeds.

The Commission says that in 2006, a Dutch tax ruling enabled Inter Ikea to pay a "significant" annual licence fee to another Ikea unit in Luxembourg, thereby shifting revenue to a jurisdiction where it remained untaxed.

Then in 2011, after the Luxembourg tax scheme was deemed illegal, Inter Ikea arranged a second tax ruling with the Netherlands.

This ruling focused on a loan deal with an Ikea unit in Liechtenstein, which enabled Inter Ikea to shift "a significant part of its franchise profits" to a low-tax jurisdiction.

A senior Dutch EU official said it would look at the details of the case.

"The Netherlands fully supports the Commission's work," they added.

The EU's competition chief Margrethe Vestager is worried giant firms are gaining unfair advantages over smaller rivals.

The Commission has recently ordered firms including various member states to collect billons of euros' worth of back taxes from Apple, Starbucks, Amazon and Fiat.

The European Commission is worried that giant companies gain an unfair advantage over smaller rivals which have no chance of using similar tax schemes.

(BBC)