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How IKEA is structured to minimize tax and maximize control
- ebaysucks 16y agoLove it. Makes my furniture cheaper. The only thing unethical about it is that these tax avoidance schemes have inherit economies of scale - startups can't afford the advice. The solution is not to eliminate the tax paradises (which would cause a revolution btw), but to eliminate the tax code altogether. If your ideology insists on coercion than at least make it a flat rate. Edit: I get accused of supporting corporatism below. I don't. I just support anyone to avoid taxes as much as possible and oppose all forms of collectivism.
- xtho 16y agoI generally enjoy reading hn but such right wing ideologies make me feel sick in the stomach. Please take into account when making such statements the US (or whereever you live) is not the world. And just because you got brainwashed after decades of conservative government doesn't mean the rest of the world is. But the rest of the world also participates in this community.
- endtime 16y agoI generally enjoy reading HN, but reddit-style thought-policing like this makes me sick to my stomach. The guy's not a rapist or a neo-Nazi, he's just not a socialist. Get over yourself.
- davidw 16y agoThis whole thread is EXHIBIT A of why there should be no politics here.
- endtime 16y agoIn case it's not apparent from my comment, I agree 100%.
- hugh3 16y agoAnd the fact that this comment was modded up to eight "Waaaaah, your ideology makes me sick" is a sign that things have gone way off the rails. I'm gonna set my noprocrast to 87000 minutes now and come back in two months.
- davidw 16y agoPeople's ideologies do make other people angry though. Which is why they should be aired on other sites.
- nika 16y agoIS that the fault of the minority who thinks different and then angers the majority? Or is that he fault of the majority who is so sensitive it cannot tolerate a minority that doesn't agree absolutely completely?
- davidw 16y agoI don't care - I just don't want to see these endless debates here. They are always the same and go 'round and 'round and nothing is ever accomplished other than pissing people off.
- JoachimSchipper 16y agoAs far as I can tell, the majority just wants the politics debates to stop.
- ugh 16y agoThis is pure semantics but are you really comfortable calling anyone who doesn’t want a flat tax a socialist? Someone who doesn’t want a flat tax could have voted for any party in my country.
- endtime 16y agoI was being a little facetious, yes, but if someone to be actually sickened by ebaysuck's position then that constrains my prediction of his beliefs a little more than just not wanting a flat tax for e.g. practical reasons. In other words, I don't think just anyone who doesn't want a flat tax would say what xtho said.
- deleted 16y ago[deleted]
- ebaysucks 16y agoI'm an anarcho-capitalist i.e. I've never seen proof for objective morality of any sort (including democracy) hence I support free markets to make the rules of society by group selection and feet voting. Just as humanity doesn't need a forced state religion to be religious, humanity doesn't need a forced tax system to be social. Please consider this view point. Don't confuse personal ethics and political morality.
- nika 16y agoSigh, I think it is a damn shame that you were put to -1 for attempting to clarify. I'm happy to get you to zero. Personally, I prefer the term "Abolitionist" to "anarcho-capitalist." I'm an abolitionist because, just like the movement of old, I endorse the abolition of slavery. Governments consider people property (the US taxes worldwide income) and believes it owns the output of said property.
- ebaysucks 16y agoThanks. Abolitionist is also a good word indeed. Another one might be political atheism. The downvotes are OK though. People feel very strongly about certain ideas for society and mistake freedom for critique on the idea instead of just on the method (coercion). For some reason parts of the world got over religious coercion. One day we'll hopefully have the same for ideological coercion.
- loewenskind 16y ago>I'm an anarcho-capitalist Do you have any good (online) literature for your position? It seems to me that having money/bartering implies a government no matter how you slice it. I can see potential with some anarchical systems, just not primitivism or ancap.
- ebaysucks 16y agoFrom the Chicago School of Economics, there is David Friedman with "The machinery of freedom". [1] A large part of the Austrian school of economics is also ancap. A great overview of the insights today can be found in "Libertarianism today" by Jacob Huebert. [2] [1] www.voluntaryistpunk.com/ebooks/The_Machinery_of_Freedom_.pdf [2] http://mises.org/store/Libertarianism-Today-P10394.aspx http://mises.org/store/Libertarianism-Today-P10394.aspx Edit: You talked about money in a free market. For that topic I recommend "What has government done to our money?" by Murray Rothbard. [3] [3] mises.org/books/whathasgovernmentdone.pdf
- nika 16y agoI'm really saddened to see that so many people have come to believe that thinking differently is wrong and should be suppressed. That coercion and violence against the innocent is the norm and that people who think that we should live free from violence and coercion are "right wing" and "brainwashed". To tell him not to participate here because he thinks differently than you is to say that your mind is not open to new ideas and that you cannot bear to be exposed to anything that comes from a different philosophical basis than the one upon which you were raised. Can you see how that is anti-intellectual?
- xtho 16y agoI didn't tell him not to participate but I asked not to dump his view on other readers since this isn't a site about political or economic theory.
- guelo 16y agoAlso makes your taxes higher.
- meric 16y agoHow about a progressive consumption tax replacing the income tax to encourage savings? It might be impossible to implement... for now.
- zizee 16y agoReplacing income tax with a consumption tax would see the super rich pay even less tax as they spend a smaller percentage of their income compared to those with a lower income. [edited to fixed a typo: "the" => "they"]
- meric 16y agoWhat it means is... The first $5000 of consumption will be tax free, the next $10000 at 5%, and the next yet at 15%, etc. So, the super rich would indeed pay a smaller percentage of their income, only if they spend the same as an ordinary consumer, but they would pay much more tax (e.g. 60% after 1 million) if they spend everything they earn. This would encourage them not to swap pieces of paper for real goods. It would make them have more money in the bank but less million dollar cars and yachts. The productivity saved from not producing those non-producing consumer goods can be used, e.g., on farming, so that food becomes cheaper for the general populace.
- zizee 16y agoI'm not sure how shutting down Porsche factories is going to make food cheaper? In western countries only a few percentage of people are in the business of producing food. By moving workers from building yachts into food production will not make food production cheaper. This plan would see the rich hording money, rather than spending it on luxuries. The kind of luxuries that are produced by western economies. When the rich spend their money on frivolous luxuries, it helps redistribute their wealth to the workers producing those luxuries.
- meric 16y agohttp://www.paulgraham.com/wealth.html http://www.paulgraham.com/wealth.html To take an example to the extreme, it would be wasteful if Warren Buffet hired 10,000 painters to paint a portrait of himself everyday. The GDP would go up, but it wastes effort, effort that can be allocated more efficiently. (Using his own example here)
- gojomo 16y agoMakes your furniture cheaper... and your taxes higher. Helps big companies and the politically-connected... hurts upstarts and people who focus on business not politicking. Makes people angry at tax distortions, not taxes themselves. So this sort of gaming doesn't advance your hopes at all. You'll have better luck with fair, broadly-based taxes, and structural protections against constant tinkering with both the progressivity and exceptions. Then we could have a rational discussion about the overall level of taxation, or possible replacements for taxation, without the distracting class-warfare and favor-trading sideshows that dominate tax policy in conventional shallow politics.
- ebaysucks 16y agoPlease consider public choice theory. Government won't lower taxes on the middle class if they find a way to tax the rich. They'd just increase taxes on the rich and keep on taxing the middle class as before. Tax levels are just a product of a) how much there is to take and b) how tax inelastic the subject is.
- stinkytaco 16y agoPublic choice theory assumes that Ikea will act in a way that benefits it as an organization (and its shareholders) and fuck the rest of you. Public choice theory essentially states that everyone is a self interested actor, the difference is that I have some control over those actors if they are elected officials, and none if they are a private company. Can I vote with my wallet? Sure, but be honest with me here, how much power does that actually give you? If a chemical company is dumping waste how do I stop doing business with everyone who does business with that company? We can't, we don't have the information or the power. Instead we elect officials that do have the information and give them the power. This applies to all situations in which I simply don't have the perspective to make the decision, including taxes. Do I think the tax system is screwed up? Sure. Do I think that eliminating it will fix the problem? Nope, but hopefully I can elect people who will fix the problem. I don't get how people want to put more power in the hands of private organizations instead of one they at least ostensibly control.
- ErrantX 16y agoI'm honestly not sure it makes furniture cheaper, either. Here in the UK at least I found IKEA to be about 10-15% more expensive to local furniture stores. And about on par (about 2-5% more expensive) with national chains. I'm in the process of kitting out my new house and, to take an example of a book case; this is the sort of think I am after: http://www.ikea.com/gb/en/catalog/products/S99823013 http://www.ikea.com/gb/en/catalog/products/S99823013 - IKEA: £160 - Homebase: (2 or 3 units together to make that design) £140 - Local Furniture Store: £130 - £150 - Second Hand: £100 ish - Self Build: about £85 plus my labour (plus; leaps and bounds better quality) Off topic note; it's currently half built :D because it's a no brainer really to have built it myself once I sorted out the costings. Highly recommend building custom furniture if you have a bit of practical skill - next up is a decent desk (cost of £200 down to under £100 with self build)
- loewenskind 16y agoI don't find IKEA cheap at all. If you get their cheap offerings (where the so called "savings" are) it's garbage that will barely last a year. If you get something decent it costs at least as much as any other store or more.
- jasonlotito 16y agoAre all those examples of "flat-pack furniture"? Self build is the cost plus labor plus the cost of the material to build, etc. Simply looking at the final product and comparing the price ignores a lot of what makes IKEA what it is, and what they provide.
- ErrantX 16y agoWell true, but the end result is the same. First two (IKEA & Homebase) are flatpack. The local shop & second hand are pre-assembled (the second hand is real wood construction so was never flat pack), but it makes little difference. Self build, sure, there is a labour "cost" - but you're looking at a couple of weekends max construction, so if you have the interest it's no biggie :) I only included it because I thought it would be interesting to encourage people to consider it as an option.
- lukesandberg 16y agoYou could argue that it makes your furniture cheaper, but isn't it more likely that the additional profit that IKEA accrues due to this complicated scheme is 1. siphoned directly to a small number of individuals 2. divided amongst the shareholders or 3. simply wasted on the tons of accountants and lawyers that it probably takes to keep this system running. Even if its not the case (at least not entirely) then you can still argue that the fact that IKEA is doing this is anti-competitive, which is surely against your ideology of anti-collectivism because it distorts natural market forces. Even someone adamantly in the Chicago school of economics would be against a scheme like this because it implies that IKEA is effectively able to compete under markedly different market conditions than its competitors.
- bound008 16y agoThis is an amazing write-up i read to counteract the piece about google's tax avoidance... I had to find it on another site though, how do you get the link to go around the paywall?
- mmmmax 16y agoWhat's with posting articles from 2006? There are more recent sources with updates, including from FT.com (behind a paywall) and the investigative documentary about this which aired last week in Sweden: http://translate.google.com/translate?hl=en&sl=sv&u=http://svt.se/2.150075/1.2304474/granskningen_av_ikea_ett_brett_samarbetsprojekt http://translate.google.com/translate?hl=en&sl=sv&u=...
- vampirical 16y agoThis the ft.com article you're referencing? http://const.it/dewall/http://www.ft.com/cms/s/0/2437643c-2985-11e0-bb9b-00144feab49a.html http://const.it/dewall/http://www.ft.com/cms/s/0/2437643c-29... (link bypasses the paywall) I personally prefer the economist article. I read it back in 06 and I've read a few more on the Ikea tax setup since then. It seems to still accurately represent the situation, some numbers might be out of date but the gist is the same. That ft.com article is a bit sparse, seemingly written as an update for people already aware of the issue, and as you say paywalled. Thanks for the additional and up to date info though.
- forgottenpaswrd 16y ago"FEW tasks are more exasperating than trying to assemble flat-pack furniture from IKEA" Am I the only one that enjoy assembling flat-pack furniture and believe it is extremely easy?.
- zizee 16y agoThe frustrating part of the exercise is running through the mouse maze that IKEA stores are designed after.
- ajtaylor 16y agoI agree with you. I've never had any problems putting together their furniture.
- hjalle 16y agoMost things are extremely easy, but there are some individual packages that are horrible. I remember putting up a wardrobe that seriously took a whole day to assemble. All parts were there though!
- thret 16y agoI like it too, it is how I imagine real men spend their time.
- Evgeny 16y agoThe only problem is when I'm on my own, but the item is too large to handle it by myself comfortably (i.e. a bed or similar).
- dagw 16y agoI've bought some flat-pack furniture from some of IKEA's competitors. After having struggled through putting that together I have to say I have new found respect for the amount of thought and design IKEA must put into how their furniture goes together.
- rtghnyhjm 16y agoIt seems to be a thing of - "I'm too cultured and refined to understand science and maths". Which extends to - I can't understand how to put simple bits of engineering together because I'm so spiritual!
- jimmybot 16y agoWhat'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.
- pacifika 16y agoYou think Target and Walmart do not avoid high taxes through clever tricks?
- alastair 16y ago"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_Companies_Low_Taxes_Are_Key_To_Profits.cfm http://wgbhradio.org/News/Articles/2011/1/29/For_Many_Compan...]
- Tichy 16y agoStill, profit is only what is left after the accountants did their job.
- deleted 16y ago[deleted]
- loewenskind 16y agoFunny 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 http://www.ctj.org/pdf/walmart041607.pdf
- jimmybot 16y agoMagnitude, not true-false.
- toadi 16y agoThey should come to Belgium. We have something called 'notionele interest aftrek' (http://www.kpmg.com/BE/en/Whatwedo/Interests/NotionalInterestDeduction/Pages/default.aspx http://www.kpmg.com/BE/en/Whatwedo/Interests/NotionalInteres...). As an example: Suez Tractebel, Energy Europe Invest en GDF Suez CC had a profit before tax : 4,8 bilion euro. Together they payed 2,3 milion euro tax. This is a tax rate of 0,049%. Oh these are the Gas & electricity companies in Belgium.
- vitobcn 16y agoThis is a pretty common scenario for international companies. Maybe most of them do not go as far as IKEA and lock their whole corporate structure, but most of them manage to achieve pretty low corporate tax rates. As an example Google was estimated to achieve an effective tax rate of only 2.4% [1] [1] Source: http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-sho...
- bryanlarsen 16y agoIt says right in the article that Google's effective tax rate is 22.2%. It pays 2.4% only on a small part of its income.
- wallflower 16y agoTo be fair, Ikea founder Ingvar Kamprad just recently admitted (2011) to the existence of the ownership foundation. > In an email from Ikea sent to the TT news agency, Kamprad admits that the Interogo Foundation in Liechtenstein exists and that it owns Inter Ikea Holding SA, which in turn owns Inter Ikea. "Interogo Foundation is a company foundation whose only goal is to invest in the expansion of the company business and secure its long-term survival. In other words, the assets of the Interogo Foundation are held as financial security and are only used if Inter Ikea has financial difficulties," wrote Kamprad. "The assets can also be used to support individual Ikea dealers who have financial difficulties or for philanthropic purposes. Interogo Foundation is controlled by my family and is administered by a board of directors consisting only of outside representatives." he added. http://www.thelocal.se/31650/20110126/ http://www.thelocal.se/31650/20110126/
- ashbrahma 16y agoGoogle cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda (Double Irish).
- sudonim 16y agoThe story would be much different if Ikea's owners were American. American citizens don't have the same affordances as foreign nationals when it comes to tax minimization. If these foundations for Ikea were majority owned by Americans, they would be subject to taxation by the IRS, regardless of in which country they were created.
- hippich 16y agoIf you are big enough and you do not rely only on US market - change country where you live.
- cschmidt 16y agoI always think of that when I see a PBS show like NOVA, sponsored by the Howard Hughes Medical Institute. At one time, they owned Hughes Aircraft, mainly as a tax dodge for Howard Hughes. The tax dodge has long outlived the company. http://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institute http://en.wikipedia.org/wiki/Howard_Hughes_Medical_Institute