EU to Investigate IKEA's Dutch Tax Arrangements -- Update
December 18 2017 - 7:48AM
Dow Jones News
By Natalia Drozdiak
BRUSSELS -- Swedish furniture retailer IKEA Group could be
forced to pay back hundreds of millions of euros in alleged unpaid
taxes to the Netherlands, following an investigation opened Monday
by the European Union.
The probe by the European Commission fits into a wider strategy
to squeeze more tax revenue from large multinationals and other
companies operating in Europe. In particular, EU officials have
been targeting sweetheart tax deals EU governments have granted
companies in a bid to lure business to their countries.
"Member states cannot let selected companies pay less tax by
allowing them to artificially shift their profits elsewhere," said
EU antitrust chief Margrethe Vestager. "We will now carefully
investigate the Netherlands' tax treatment of Inter IKEA."
The EU said its investigation into the Swedish retailer of
flat-packed furniture focuses on the Dutch government's treatment
of Inter IKEA Systems, one of the two groups operating the IKEA
business.
The Netherlands and IKEA didn't immediately respond to a request
for comment.
The commission said IKEA skirted paying taxes through the help
of two tax rulings issued by the Netherlands in 2006 and 2011. Tax
rulings, which confirm to the company how specific taxes should be
calculated, aren't prohibited as such. However, they are illegal if
they hand the company a benefit not available to other rivals.
The commission said it believed the tax treatment given to IKEA
wasn't available to other companies in the Netherlands.
A person familiar with the matter drew a link between the EU's
probe and a 2016 report commissioned by the Green Party in the
European Parliament, which accused IKEA of avoiding paying EUR1
billion ($1.18 billion) in taxes over six years.
The EU said the 2006 tax ruling endorsed a method to calculate
an annual licence fee that Inter IKEA Systems in the Netherlands
paid to another IKEA company called I.I. Holding, based in
Luxembourg.
The fee made up a significant part of Inter IKEA Systems'
revenue and resulted in the shifting of most of the company's
franchise profits to Luxembourg, where they remain untaxed, the EU
said. The Luxembourg unit was part of a special tax scheme,
exempting it from corporate taxation there. That scheme has since
been declared illegal but no illegal aid had to be recovered.
The 2011 tax ruling issued by the Dutch government endorsed the
price Inter IKEA Systems paid for the acquisition of the
intellectual property rights from I.I. Holding. Inter IKEA received
an intercompany loan from its parent company in Liechtenstein to
finance the deal, the EU said.
That in turn allowed Inter IKEA Systems to shift its franchise
profits to Liechtenstein through its interest payments on the loan,
the EU said. The commission said it would scrutinize whether those
payments reflect economic reality.
The launch of the investigation into the Swedish retailer
bolsters the EU's attempts to beat back accusations that it
disproportionately targets American companies, particularly in its
probes into alleged illegal state aid granted via favorable tax
deals.
In a blockbuster decision, the commission in 2016 ordered Apple
Inc. to pay Ireland EUR13 billion, in what it said was uncollected
taxes, a ruling both Apple and Ireland are contesting. Shortly
after that, the EU launched an investigation into French energy
company Engie SA tax dealings with Luxembourg.
The commission has already trained its sights on Netherlands's
tax rulings in the past. The EU in 2015 ordered the Dutch
government to recover millions of euros from Starbucks Corp. in
allegedly unpaid taxes, a decision the Netherlands is
appealing.
The EU continues to investigate Engie's as well as McDonald's
Corp.'s tax affairs with Luxembourg.
Write to Natalia Drozdiak at natalia.drozdiak@wsj.com
(END) Dow Jones Newswires
December 18, 2017 07:33 ET (12:33 GMT)
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