According to CNN Money, Ikea has done wrong! Why is Ikea guilty? The term is “tax avoidance.” The headline uses another term: tax “dodging.” By avoiding or dodging taxes, Ikea managed to keep $1.1 billion dollars out of the government’s possession.
Ikea has been accused of dodging up to 1 billion euros ($1.1 billion) in taxes between 2009 and 2014, according to a report by the Green party in the European Parliament.
The political group is accusing the retailer of “large scale tax avoidance.”
Ooh! That sounds bad.
Remember back when Timothy Geithner was being confirmed as Secretary of the Treasury and “forgot” to report income, allegedly because TurboTax didn’t work right? This was a clear case of unlawful tax evasion. But for an apology and a late payment, Geithner was confirmed as the head of the department in charge of the enforcement of our nation’s tax laws. When people read that Ikea is “dodging” taxes or practicing “tax avoidance,” they typically assume this means illegal tax evasion—a failure to report income or something just as serious. Why else would the European Commission, the top E.U. regulator, agree to study the report?
But what Ikea is accused of doing is submission to the laws. The company is “guilty” of compliance.
Buried at the bottom of the story is this admission (emphasis added):
The European Union is trying to crack down on this kind of corporate tax avoidance, aiming to close legal loopholes that allow companies to minimize taxes.
Legal loopholes? What Ikea did was transfer money to a country with a lower tax rate. Partisans of governments that don’t care about anything but increasing tax revenue for those governments may not like the fact that Ikea and other companies do not pay more, but that is not Ikea’s problem. Ikea has a duty to their owners not to lose money on unnecessary expenses. Any publicly owned company that pays a lot of avoidable taxes is ripping off their stockholders. Also, in a competitive, somewhat free-market economy, a company that doesn’t minimize its losses to taxes will be at a disadvantage compared to another company that protects its assets and revenue better.
In my state, if you get a computer by ordering it from Apple.com you will have to pay the state’s sales tax. That is because Apple has retail outlets in the state. On the other hand, if you order from MacMall, you don’t have to pay sales tax. Now if you are a small business that needs some office computers, ordering from MacMall can save you a significant sum of money. How is that tax avoidance wrong or suspicious?
When liberals propose taxing sodas or cigarettes, they acknowledge that taxes are something that human beings will try to avoid. The whole point of these “sin taxes” is to influence human behavior so people will practice “tax avoidance” by smoking less or drinking fewer sodas. So when companies respond to tax laws in the same way, why treat them as if they are evil?
If the EU makes it illegal for Ikea to keep over a billion dollars, then they will have to pass on the new costs to customers, just like Barack Obama wants the oil companies to do with his proposed new oil tax. Or, if the customers refuse to pay higher promise, perhaps Ikea will practice a new kind of tax avoidance—going out of business.