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.
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.