IKEA: Flat-pack accounting (2006)

Please tell us about the time you most successfully hacked some (non-computer) system to your advantage.

Here's a diagram of the fund structures:

http://landofthefreeish.com/wp-content/uploads/2009/02/ikea-...

I don't see anything bad with that. IKEA is a non profit and its rules apply. Dereck did that too:

http://sivers.org/trust

Ingvar Kamprad is the prototype of Calvinist, hard working, humble and low expenses man. When he came here to Spain, to visit IKEA's stores, he used regular line airplane, and public bus transport.

IMHO, he don't want to make his family stupid rich(think Gucci family,wasting on luxury, power, drugs, sex, fights for the money and murders between them) when he is dead, but wants them to have something they can make a life from.

I wonder: if IKEA had been paying income taxes all along, how much less in personal income taxes would they have generated?

Corporate income is the single source of income most likely to be productively reinvested, because corporations function more like homo economicus than any other kind of entity. And since they're entirely owned by either a) people, or b) charities, it doesn't make sense to talk about taxing corporations instead of individuals--rather, you should refer to corporate income tax as a tax on individuals and nonprofits, instead of just individuals.

From that perspective, IKEA pays the socially optimal corporate income tax: zero.

Similar structures using foundations have been used in the USA for many years, at least since the 1950s if not before.

Congress investigated in 1952-53...

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

While it was not the thrust of the investigation, it did come to light that many rich people were using foundations as a way to shield themselves from taxes or to retain control of a company via a two-tier voting class for shares.

Note that the article is from May 2006.

I think it's a shame they are using these kinds of aggressive tax planning tactics, while still marketing themselves as being Swedish/Nordic. And to put this view in context, Sweden does not have the same social system as the US. But this would be aggressive even for an American company.

If I understand US law correctly, a non-profit corporation is allowed to own a for-profit corporation (just like it can own any other asset), but that doesn’t exempt the for-profit corporation from taxes; it just means that all the after-tax profits go into the non-profit’s coffers. And when a non-profit corporation pays its employees or directors, that money becomes taxable income. Does Dutch law work the same way? How much are the Ikea companies actually saving from the taxman this way?

I think the root of the problem exists in the simple fact that tax laws are different in various states/countries. Accountants/lawyers are paid to figure them out, and rewarded well when they find benefits to the myriad of rules and regs. I was even employed once to optimize a large corporation with 100s of entities in different taxing regions. I　enjoyed the work, but it was evil (only looking back in retrospect of course).

When reading a story like this it's hard to know whether to smile wryly at the accountants' ingenuity or weep quietly at the injustice of it all.

US politicians are learning this trick too.

While non-profit foundations belonging to US politicians typically don't own shares of corporations, it's very hard to see these non-profits doing any charitable output; a lot of these organizations just have huge administration costs: plane tickets, dinners, and so on

I think systems like this are in place in many different companies.