[jimmybot]

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 generally don't pay sales tax. That's a huge, unfair retail advantage compared to Barnes & Noble and other brick-and-mortar stores, especially since retail margins are generally so thin.

[loewenskind]

>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.

[lionhearted]

> When Adam Smith wrote about "the invisible" hand, he noted that it would only work if companies weren't allowed to grow too large.

Citation? I've read most of Wealth of Nations, and I recall Smith spending a lot of time on monopolies - where the monopoly can constantly undersupply the natural demand, and charge premiums because of it.

But I didn't recall anything about companies becoming too large... in fact, he wrote famous defenses of companies like East India importing, so long as they didn't receive exclusive (monopoly) trade rights. That was one of the larger companies of the day.

But Smith wrote a lot, so I might've missed it. Cite?

[loewenskind]

I don't have my sources handy, but this:

>he wrote famous defenses of companies like East India importing

Sounds wrong to me. There is some discussion of it here: http://adamsmithslostlegacy.blogspot.com/2011/01/claims-for-...

"Also chartered companies were well known as witnessed by Adam Smith’s negative assessment of chartered companies in general and the East India Company in particular, contained in the Wealth of Nations."

[dantheman]

Smith was wrong about quite a lot, including stuff that was known at that time. For instance, Smith believed in a labor theory of value - this to a great extent influenced Marx, IIRC. They were both wrong, Marx disastrously so.

[kalpeshjoshi]

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 consumers, employees, vendors, shippers, contractors, etc. To entice Walmart, states give tax subsidies, devalue property assessments, etc.

I'm not saying IKEA doesn't have the same retail financial prowess with state regulators, but let's be fair, many corporations do what they can to get tax loopholes. Accenture, a global consulting powerhouse was incorporated in Bermuda strictly to avoid paying taxes on billions of dollars.

[bhavin]

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

[raphar]

Google scheme to lower corporate taxes :

http://www.businessweek.com/magazine/content/10_44/b42010431...

[kalpeshjoshi]

yea true, again for taxes... And it should be noted that Accenture struck a deal with the Bermuda government (me thinks) to pay limited amounts on a fixed timeline, in any case, they were paying pennies (and got a lot of heat for it) while raking in billions.

Ireland, good find, hopefully the gov't can get more into their pot of gold :P

[jimmybot]

I mentioned Walmart because they sell some furniture too, though the article points out that IKEA doesn't really have true competitors. You're right, Walmart has avoided quite a bit of tax, and that would be unfair relative to other big box stores or supermarkets. However, I don't think the magnitude of tax savings is anywhere near that of IKEA running in the guise of a charity.

In any case, I'm certainly not arguing for Walmart. I'm merely pointing out that these tax avoidance schemes lead to unfair competition when not all players have access to the same schemes. It should be a level regulatory environment for everyone.

[arethuza]

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!

[jacques_chester]

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.

[cletus]

In the US this won't avoid the 500 shareholder limit. This came up in the discussion about Goldman's Facebook investment vehicle. The SEC can make a determination about effective shareholders.

[jacques_chester]

Thanks for the correction.

[arethuza]

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.

[jacques_chester]

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.

[Tichy]

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?

[jacques_chester]

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".

[rtghnyhjm]

I think the Dutch Sandwich is something like - you move all the money to Netherlands, so no tax in the rest of Europe (common market) then to a Dutch owned off-shore tax haven like the Dutch Antilles - so you pay no tax in the Netherlands either.

[yungchin]

I suppose the Netherlands have double-taxation agreements with many places in the world, see https://secure.wikimedia.org/wikipedia/en/wiki/Double_taxati...

[pacifika]

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

[alastair]

"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...]

[Tichy]

Still, profit is only what is left after the accountants did their job.

[loewenskind]

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

[jimmybot]

Magnitude, not true-false.

[hippich]

Re: Amazon - all products from amazon have to be shipped. There is no sales tax, but there is shipping charges. Not quite the same, but consumer do not care usually.