Belfast Telegraph

Ikea's labyrinthine tax structure is unpacked

By Margaret Canning

Its labyrinthine floor lay-outs have provided orienteering training ground for girl Scouts. Now a light has been shone on the labyrinthine management structure of Swedish furniture giant Ikea, the country's second most famous export (after ABBA, of course).

Ingvar Kamprad set up the flatpack furniture pioneer from his father's farm in southern Sweden nearly 70 years ago.

Few know whether Mr Kamprad - the eleventh richest man on Forbes' list - is still in control of the company, which has stores in hundreds of countries around the world.

Now it has emerged that a foundation in Liechtenstein controls a key part of the business.

Investigative TV reporters in Sweden unearthed the existence of the foundation, proving that Mr Kamprad still has his creation in his grasp.

While there is nothing illegal in the structure, it will create curiosity about how an iconic company like Ikea can use a haven like Liechtenstein to limit its exposure to tax.

Like the clamour which fell on Top Shop guru Sir Philip Green when it emerged that he paid a £1.2bn dividend to his Monaco-based wife, Swedes were disappointed that a national hero had employed a complex system for corporate governance.

It has also divided people because while creating Sweden's best known company, he has also exported much of its success. And it has also drawn criticism given that it is a company with a reputation for corporate responsibility. But in a statement, Mr Kampard shrugged off the criticism, saying it paid its taxes but that there was nothing wrong with trying to be tax-efficient.

"An optimised tax structure allows us the flexibility to use funds that have already been taxed in one market in new markets for further business development without the additional burden of double taxation."

Managers reportedly travel by budget airline and keep costs low, which in turn keeps the cost of its furniture low.

Lifting the corporate veil may turn out to be good for Ikea's image - it recently disclosed its annual profit figure for the first time, in a bid to dispel its reputation for secrecy.

Profits from its retail business were up 6.1% to $2.7bn, with sales up 7.7% to $23.1bn.

It's unlikely they will be dented by the airing of its corporate laundry.