European Regulators Open Investigation Into Ikea’s Taxes

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European regulators on Monday opened an investigation into the tax structure of the furniture retailer Ikea, the latest inquiry in a crackdown on potential tax evasion by multinational corporations.

The European Commission, the European Union’s executive arm, said it was concerned that tax rulings in the Netherlands may have allowed Inter Ikea, one of the company’s operating divisions, to pay less tax since 2006, and may have given it “an unfair advantage over other companies,” in breach of European rules on state aid.

“All companies, big or small, multinational or not, should pay their fair share of tax,” Margrethe Vestager, the bloc’s top antitrust official, said in a statement. “Member states cannot let selected companies pay less tax by allowing them to artificially shift their profits elsewhere.”

Ikea, known for its flat-pack furniture, reported revenue of 36.3 billion euros, or about $43 billion, in its 2017 financial year, which ended in August.

In a report last year, the European Green Party said that Ikea was able to avoid an estimated €1 billion in taxes from 2009 to 2014 because of its corporate structure.

The company’s business model was changed to a franchise structure in the early 1980s, with Inter Ikea operating its franchise business. Inter Ikea, through a Dutch subsidiary, receives franchise fees equal to 3 percent of the revenue from Ikea stores worldwide, according to regulators. Although Ikea was founded in Sweden in 1943, the parent company is based in the Netherlands.

European regulators are concerned in particular about a 2006 Dutch ruling that allowed Inter Ikea to send a significant part of its franchise profits, in the form of an annual license fee, to a company in Luxembourg, where it was not taxed.

Investigators also are looking at a subsequent ruling by the Dutch authorities in 2011 after European regulators deemed the Luxembourg tax structure illegal under state-aid rules. That ruling endorsed a model that allowed Inter Ikea to send a significant portion of its franchise profit, via interest paid under an intercompany loan, to a Liechtenstein company.

The Ikea inquiry is the latest in series of investigations by European regulators since 2013 into the tax structures of multinational companies operating in Europe and how they are treated by the local tax authorities.

The European Commission has ordered several members of the 28-nation bloc to collect billions of euros in back taxes from companies including Amazon, Apple, Fiat and Starbucks.

This year, the commission took Ireland to court after the country refused to collect €13 billion from Apple in unpaid taxes following a 2016 decision by European regulators.

The commission also is investigating Luxembourg’s treatment of McDonald’s and of Engie, formerly known as GDF Suez, and a tax program for multinational companies in Britain.