Ikea Is A Nonprofit, And Yes, That's Every Bit As Fishy As It Sounds

Ikea makes billions tax-free by operating the world’s largest "charity." Here’s how.

Ikea sells $28 billion in furniture a year, making it the world's largest furniture company. But the retailer pays a slender tax rate of just 3.5%—about a billion dollars—rather than the 18% rate it should pay. How? Ikea is a nonprofit dedicated to furthering the advancement of architecture and interior design—a cause they give a pittance of $2 million or so to a year.

How is this possible?

This superb whiteboard explainer will hash things out for you. But here’s the gist of it:

  • Ikea Group operates 290 stores across the world.

  • Ikea Group is owned by Ingka Holding. (So far, that’s a pretty typical company/parent-company arrangement.)

  • But Ingka Holding is owned by the nonprofit Stichting Ingka Foundation.

  • The Stichting Ingka Foundation is estimated by The Economist to be even larger than the Gates Foundation, which has $37 billion in its coffers. (The Economist estimated the Ingka Foundation at $36 billion in 2005, but that figure has probably grown.)

  • Money isn’t trapped inside Ikea’s foundation. The Ikea trademark and concept is owned by another private company, Inter Ikea Systems. So just to operate Ikea stores and use the brand name, the nonprofit has to pay each year—payments that, while obscured by corporate structure, most likely make their way back to Ikea founder Ingvar Kamprad and his family.

Kamprad is a publicly frugal man who despises taxes. He and his Swedish design label actually fled to Switzerland in 1976 to avoid taxes. (Kamprad didn’t deploy his nonprofit scheme until the '80s.)

In case your palate has been whetted for some corporate conspiracy, the Economist published the foundational investigation on Ikea’s nonprofit tax evasion back in 2005. From what we can tell, it’s still every bit as relevant, because Ikea has only grown bigger since.

* An original version of this article labeled the Gates Foundation and Ingka Foundation's endowments as being in the millions rather than the billions.

See more here.

[h/t: reddit]

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13 Comments

  • The IKEA tax evasion scheme showed some very good talents (Lawyer, MBA) are being wasted. Smart people employed for the sore purpose of protecting and enriching some super rich individuals.

  • Martin Gonzalez

    The author's computation of a billion dollars in taxes needs to be audited. Impossible from $28 billion in revenue.

  • Minor (but important) clarification - unless what they are doing is illegal, its avoidance not evasion.

    The issue isn't that IKEA is a non profit, the issue is that IP transfer pricing laws allow companies with mobile IP to choose whatever tax jurisdiction they want to, while other companies who can't move their IP are stuck in whatever jurisdiction they do business in.

  • Sangeeta Sunny

    Can I take a second to talk about the awesome art work. That is an infographic!
  • Vicky Raff

    Could you sometime look at the interrelationships between Monsanto and Pfizer? They used to be connected, but now they aren't, on paper anyway. But they have a majority shareholder base in common. So, brilliant business model, feed the population GMO/insecticides and herbicides and then the other company will sell you medicine to make you "well."

  • Just a general FYI: You all seem to be assuming 501-C(3) status which is applicable to neither Ikea nor the NFL. That (3) means something: Charity isn't the only non-profit designation.

  • Hi Mark,

    My understanding is that the Inter IKEA Group is owned by Interogo, an enterprise foundation based in Liechtenstein. That is to say, no one is making a private profit from IKEA. Rather, it's demonstrative of a new era of not-for-profit business.

    Donnie
  • Miriam Kelley

    I would like to see this explained in regards to the NFL. Aren't they a non-profit as well?
  • Cathy Stern Cotter

    I was thinking this very same thing. How does the NFL have non-profit status?

  • Did you mean the Bill and Melinda Gates Foundation? Because they have $50 billion in their endowment. And it looks like The Economist estimated Stichting at $36 billion (in 2009). Also missing here is the distinction that Stichting is a non-profit under Dutch authority, not US, which complicates things. Very interesting, though.
  • davidjmcgraw

    I believe you mean billions and not millions when describing the Stichting Ingka Foundation and the Gates Foundation.