Europe investigates Ikea’s ‘tax reduction’ deal with Dutch treasury

Ikea has been accused of building its own tax rate. Photo:

The European Commission has launched an investigation into two deals between the Dutch tax service and Ikea that allowed the Swedish furniture giant to reduce its tax bill by hundreds of millions of euros.

The Commission said it is ‘concerned’ that Dutch authorities may have colluded in giving the company an unfair advantage over its domestic competitors, which would breach EU trade rules.

Delft-based Ikea Holdings owns the rights to the Ikea brand name and logos and charges the company’s stores 3% of their annual turnover for the rights to use them. The EU is investigating if this mechanism is a device to enable Ikea to avoid paying tax on part of its profits.

Ikea also negotiated a deal in 2006 with the tax service allowing it to transfer a significant portion of its profits to Luxembourg, where it is not required to pay tax. When that deal was ruled illegal by the European Commission the company struck a new deal that allowed it to move its profits to Liechtenstein, which is not in the EU.

European competition commissioner Margrethe Vestager said: ‘Countries cannot just allow selected companies to pay less tax. We will investigate this case in the Netherlands thoroughly.’

Last year junior finance minister Eric Wiebes refused to give MPs a confidential briefing on the deal with Ikea, arguing that commercial confidentiality outweighed the need for democratic accountability.

The Dutch tax authorities have been censured in the past for so-called ‘sweetener deals’ to recruit multinational companies. In 2015 the European Commission ordered the Netherlands to reclaim €30 million from coffee giant Starbucks which it said the coffee giant had avoided in tax through illegal state aid .