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How the EU Could Crush an Ikea Stock

Written By Jeff Siegel

Posted September 2, 2016

Few companies have been the focus of so much IPO enthusiasm as Ikea.

The furniture retail giant that raked in $35.7 billion in sales last year is a powerhouse. With 375 retail outlets across the globe, its footprint can’t be matched. And the company continues to grow rapidly.

So clearly, just the mention of an Ikea stock gets investors all hot and bothered. After all, who wouldn’t want an early piece of this kind of action?

But if the EU has its way, an Ikea stock is the last thing management will have time for.

When the EU attacks

Earlier this week I told you how the European Commission was trying to force Apple (NASDAQ: AAPL) to pay $14.5 billion in back taxes which, by the way, don’t actually exist as the company has complied with all relevant tax laws.

Well as it turns out, Apple may not be enough for the EU mafia.

According to Johanna Cervenka from the Swedish national broadcaster SVT, Ikea may be the EU’s next target.

As reported in Sputnik News, after Ikea was featured in the LuxLeaks financial scandal, the Swedish company received the dubious title of “world champion of tax optimization” by the French newspaper Le Monde.

According to confidential information about Luxembourg’s tax rulings set up by PricewaterhouseCoopers, Luxemburg had given international corporations, including Ikea, extremely favorable tax treaties.

In a report from the Green Group in the European Parliament, published in February this year, Ikea was found to make use of loopholes in the law to pay itself royalties to reduce its overall taxation bill. This meant that the company may have underpaid about €1 billion in taxes during the years 2009-2014. According to the report, Ikea collaborated with Luxembourg, Lichtenstein and Belgium to achieve reduced taxation. For its part, Ikea, very much like Apple, maintains it tries to act responsibly in tax issues and follows the laws and rules.

So basically, in an effort to pay the least amount of taxes, Ikea used the tools handed to it by various tax regimes throughout Europe.

Some may consider this unethical (although I would argue taxation in itself is unethical), but illegal?

The Shakedown of Ikea

I actually like how Ikea has responded …

The Ikea group pays taxes in accordance with laws and regulations, wherever we are present as retailer, manufacturer or in any other role. We have a strong commitment to manage our operations in a responsible way and to contribute to the societies where we operate.

Ikea has paid corporate taxes of about $918 million at an effective rate of 19%. As well, the company has paid an additional $781 million by way of other taxes such as property tax.

Once again, the EU is attempting to bully the companies that already contribute so much tax revenue to the region.

As well, throughout Europe, Ikea employs more than 107,000 people, and quite frankly keeps many local economies alive.

It’s also worth noting that few companies have taken on a more active role in environmental sustainability than Ikea. In fact, the company has pledged to power all its stores with renewable energy by 2020.

To date, it has installed more than 700,000 solar panels on buildings all over the world. It also owns about 300 wind turbines.


The EU is very concerned about climate change and has been very aggressive in its attempts to turn most of Europe into a sort of “clean energy” zone. Yet it attacks one of the companies that has done more to integrate clean energy than practically any other company operating in the EU.

In any event, I’m not certain how this is going to pan out for Ikea. I’m sure they’re lawyered up, and that alone is costing the company millions. It’s insane that Ikea has to pony up so much in legal fees to fight what is essentially a witch hunt.

Either way, with the EU now focusing its shake-downs on Ikea, any investor hoping to see an Ikea stock in the near future may be disappointed.