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How IKEA is structured to minimize tax and maximize control

economist.com

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Re: How IKEA is structured to minimize tax and maximize control

#51

Post by ErrantX »

ebaysucks wrote: post #2

Love it. Makes my furniture cheaper. The only thing unethical about it is that these tax avoidance schemes have inherit economies of scale - startups can't afford the advice. The solution is not to eliminate the tax paradises (which would cause a revolution btw), but to eliminate the tax code altogether. If your ideology insists on coercion than at least make it a flat rate. Edit: I get accused of supporting corporat…

I'm honestly not sure it makes furniture cheaper, either.

Here in the UK at least I found IKEA to be about 10-15% more expensive to local furniture stores. And about on par (about 2-5% more expensive) with national chains.

I'm in the process of kitting out my new house and, to take an example of a book case; this is the sort of think I am after: http://www.ikea.com/gb/en/catalog/products/S99823013

- IKEA: £160

- Homebase: (2 or 3 units together to make that design) £140

- Local Furniture Store: £130 - £150

- Second Hand: £100 ish

- Self Build: about £85 plus my labour (plus; leaps and bounds better quality)

Off topic note; it's currently half built :D because it's a no brainer really to have built it myself once I sorted out the costings. Highly recommend building custom furniture if you have a bit of practical skill - next up is a decent desk (cost of £200 down to under £100 with self build)

Re: How IKEA is structured to minimize tax and maximize control

#52

Post by jacques_chester »

arethuza wrote: post #45
jimmybot wrote: post #27

What's terrible about IKEA's whole tax avoidance scheme is that it gives an unfair advantage to IKEA over Target, Walmart, etc. who are all presumably paying expected amounts of corporate tax and additionally, by virtue of being public companies, provide a great amount of transparency versus IKEA. Another example of a business built in part on a tax loophole--Amazon.com and its online brethren whose customers general…

If you keep a tight control on the number of shareholders you have there is no reason why you have to go public - of course the reporting standards are going to be lower for private companies, if you don't want that overhead don't go public!

Indeed some companies use multi-level shareholdings to avoid scrutiny (warning: I am not a corporate lawyer and corporations law varies remarkably from country to country. Do not rely on this advice.).

Say you have Actual Company, Inc (ACI). ACI can't have more than 500 shareholders or it must go public.

So instead ACI issues only 500 shares. 250, say, are kept by the 2 founders. The other 250 are divided up as the sole assets of 250 other companies (ACI Holdings Number 1, ACI Holdings Number 2 etc), each issuing 500 shares.

This means that in one sense, ACI has only 252 shareholders. In another sense, it has up to 125,000 owners.

I believe Goldman Sachs used something like this tactic for the recent Facebook deal.

Re: How IKEA is structured to minimize tax and maximize control

#53

Post by jacques_chester »

Tichy wrote: post #42
jimmybot wrote: post #27

What's terrible about IKEA's whole tax avoidance scheme is that it gives an unfair advantage to IKEA over Target, Walmart, etc. who are all presumably paying expected amounts of corporate tax and additionally, by virtue of being public companies, provide a great amount of transparency versus IKEA. Another example of a business built in part on a tax loophole--Amazon.com and its online brethren whose customers general…

I don't completely get it - if they are a charity in the Netherlands, does it automatically exempt them from paying taxes all over the world?

A former I-banker of my acquaintance once tried to explain schemes like these to me. There's one call the "Double Dutch Sandwich", involving sending the money on a roundtrip through Holland, then Ireland, then Holland again. Or was it the other way around? Either way, it made me think fondly of PHP spaghetti code.

edit: I got it wrong. There's the "Double Irish" and the "Dutch Sandwich".

Re: How IKEA is structured to minimize tax and maximize control

#54

Post by [deleted] »

jacques_chester wrote: post #52
arethuza wrote: post #45

Earlier quoted context omitted.

If you keep a tight control on the number of shareholders you have there is no reason why you have to go public - of course the reporting standards are going to be lower for private companies, if you don't want that overhead don't go public!

Indeed some companies use multi-level shareholdings to avoid scrutiny (warning: I am not a corporate lawyer and corporations law varies remarkably from country to country. Do not rely on this advice.). Say you have Actual Company, Inc (ACI). ACI can't have more than 500 shareholders or it must go public. So instead ACI issues only 500 shares. 250, say, are kept by the 2 founders. The other 250 are divided up as the s…

[deleted]

Re: How IKEA is structured to minimize tax and maximize control

#55

Post by loewenskind »

alastair wrote: post #37
pacifika wrote: post #35

Earlier quoted context omitted.

You think Target and Walmart do not avoid high taxes through clever tricks?

"Wal-Mart paid 34 cents in taxes for every dollar of profit it made in the past three years." [ http://wgbhradio.org/News/Articles/2011/1/29/For_Many_Compan... ]

Funny that the articles uncited tax number only went back 3 years. What would happen if they went back more? http://www.ctj.org/pdf/walmart041607.pdf

Re: How IKEA is structured to minimize tax and maximize control

#56

Post by arethuza »

jacques_chester wrote: post #52
arethuza wrote: post #45

Earlier quoted context omitted.

If you keep a tight control on the number of shareholders you have there is no reason why you have to go public - of course the reporting standards are going to be lower for private companies, if you don't want that overhead don't go public!

Indeed some companies use multi-level shareholdings to avoid scrutiny (warning: I am not a corporate lawyer and corporations law varies remarkably from country to country. Do not rely on this advice.). Say you have Actual Company, Inc (ACI). ACI can't have more than 500 shareholders or it must go public. So instead ACI issues only 500 shares. 250, say, are kept by the 2 founders. The other 250 are divided up as the s…

In the UK the way to avoid scrutiny as much as possible is to become a partnership (not an LLP though) - you don't have to report very much but you do have the rather scary joint and several liability.

Re: How IKEA is structured to minimize tax and maximize control

#57

Post by jacques_chester »

arethuza wrote: post #56
jacques_chester wrote: post #52

Earlier quoted context omitted.

Indeed some companies use multi-level shareholdings to avoid scrutiny (warning: I am not a corporate lawyer and corporations law varies remarkably from country to country. Do not rely on this advice.). Say you have Actual Company, Inc (ACI). ACI can't have more than 500 shareholders or it must go public. So instead ACI issues only 500 shares. 250, say, are kept by the 2 founders. The other 250 are divided up as the s…

In the UK the way to avoid scrutiny as much as possible is to become a partnership (not an LLP though) - you don't have to report very much but you do have the rather scary joint and several liability.

We have partnerships here in Australia too, so too the USA I believe. Same scary joint-and-several thing.

Some partnerships go one step further and become Swiss "vereins". Sort of somewhere between an unincorporated association and a legal partnership.

Re: How IKEA is structured to minimize tax and maximize control

#58

Post by loewenskind »

jimmybot wrote: post #27

What's terrible about IKEA's whole tax avoidance scheme is that it gives an unfair advantage to IKEA over Target, Walmart, etc. who are all presumably paying expected amounts of corporate tax and additionally, by virtue of being public companies, provide a great amount of transparency versus IKEA. Another example of a business built in part on a tax loophole--Amazon.com and its online brethren whose customers general…

>gives an unfair advantage to IKEA over Target, Walmart

Ugh. You correctly note that tax avoidance is an unfair advantage but list among your victims some of the biggest companies in the world. Do you think Walmart is at a disadvantage? They almost certainly avoid more taxes than IKEA (if nothing else, because they make a lot more money).

When Adam Smith wrote about "the invisible" hand, he noted that it would only work if companies weren't allowed to grow too large. Once a company gets big enough it no longer has to participate in the market. Massive tax avoidance is just one of the many ways that companies like Walmart can use their size and power to keep small players out.

Re: How IKEA is structured to minimize tax and maximize control

#59

Post by bhavin »

kalpeshjoshi wrote: post #40
jimmybot wrote: post #27

What's terrible about IKEA's whole tax avoidance scheme is that it gives an unfair advantage to IKEA over Target, Walmart, etc. who are all presumably paying expected amounts of corporate tax and additionally, by virtue of being public companies, provide a great amount of transparency versus IKEA. Another example of a business built in part on a tax loophole--Amazon.com and its online brethren whose customers general…

First, let's not forget that Walmart is the largest retailer in the world, for several reasons. But skimping on state and local tax regulation is something that Walmart has done over the years. Most states (not all cities tho) want a company like Walmart, it provides lots of jobs (we won't take about labor wages), and creates perpetual economic growth in a neighborhood / city / region through a whole ecosystem of con…

Small correction: Accenture was incorporated in Bermuda. But moved to Ireland in 2009, again for the tax purposes though!

http://en.wikipedia.org/wiki/Double_Irish_Arrangement

Re: How IKEA is structured to minimize tax and maximize control

#60

Post by loewenskind »

ErrantX wrote: post #51
ebaysucks wrote: post #2

Love it. Makes my furniture cheaper. The only thing unethical about it is that these tax avoidance schemes have inherit economies of scale - startups can't afford the advice. The solution is not to eliminate the tax paradises (which would cause a revolution btw), but to eliminate the tax code altogether. If your ideology insists on coercion than at least make it a flat rate. Edit: I get accused of supporting corporat…

I'm honestly not sure it makes furniture cheaper, either. Here in the UK at least I found IKEA to be about 10-15% more expensive to local furniture stores. And about on par (about 2-5% more expensive) with national chains. I'm in the process of kitting out my new house and, to take an example of a book case; this is the sort of think I am after: http://www.ikea.com/gb/en/catalog/products/S99823013 - IKEA: £160 - Home…

I don't find IKEA cheap at all. If you get their cheap offerings (where the so called "savings" are) it's garbage that will barely last a year. If you get something decent it costs at least as much as any other store or more.
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