Swedish icon Ikea is really a Dutch ‘charity’

Sweden takes great pride in furniture and household goods megastore Ikea. When Jordan opened its first Ikea outlet, the Swedish Embassy in Amman published a statement on its website congratulating the country. The embassy then posted a blatant Ikea ad on its Facebook page, asking, “Did you know that Ikea has more than 300 stores in 38 countries?”

Last year the Swedish Embassy in Cairo, Egypt, touted the opening of first Ikea store in Africa. It’s not often an embassy congratulates a host country for the opening of a store, but really, what could be more Swedish than Ikea?

Few multinational corporations have managed to align themselves as neatly with a particular national identity as Ikea. Even fewer have done so with such spectacular good will. The Swedish company offers affordable furniture for the home, sold in efficient stores drenched in yellow and blue — the colors of the Swedish flag — with restaurants selling the company’s signature Swedish meatballs. The government sees pushing Ikea abroad as a soft power for Sweden, piggy-backing on the company’s success as well as unashamed promotion of the supposed Swedish values of economy, self-sufficiency and family-friendliness.

It is a great story. Unfortunately, it is based on a lie.

Ikea’s association with Swedishness and Swedish values is so ironic that one would be hard pressed to know where to begin. One obvious place to start would be to note that the Swedish government is using taxpayer money to give free advertising to a corporation that left Sweden to avoid paying taxes. Ikea contributes next to nothing to Sweden in the form of corporate tax, all while making billions off of its Swedish image. In fact, the company has gone to extraordinary lengths to avoid giving anything back to the national budgets of their host nations.

Ikea’s corporate structure is complicated, but the key point is that Ikea is a Netherlands-based “charity.” For many years, the vast majority of its outlets have been controlled by the Dutch company Ingka Holding, which in turn is owned by the not-for-profit Stichting Ingka Foundation, which was created in 1982 by the founder of Ikea, Ingvar Kamprad, for the purpose of ”furthering the advancement of architecture and interior design.” The Stichting Ingka Foundation is often listed as the wealthiest charitable foundation in the world, with assets in excess of $35 billion. As a result, Ikea pays a minuscule 3.5 percent nonprofit tax rate, far lower than its for-profit counterparts. In addition, recent revelations from LuxLeaks, an investigative project by the International Consortium of Investigative Journalists, show the company has made deals with the government of Luxembourg in order to pay as little tax as possible to anyone, anywhere. 

The company’s elaborate tax-avoidance scheme conflicts with its notion of Swedishness. Swedish social democracy is based on collective responsibility — the Swedish citizens’ willingness to sacrifice a little so that broader society might benefit. This sacrifice is crystallized in the form of taxation: Many (but not all) people in Sweden are willing to pay slightly higher taxes on income, alcohol, tobacco and gasoline in exchange for, for example, universal health care, generous parental leave and progressive environmental policies.

“A whopping 83 percent of Swedes say they have confidence” in the Swedish tax agency, despite the fact that “Sweden is as noted for its high personal taxes as it is for Ikea furniture,” according to the Swedish government. According to the government’s logic, nothing could be less Swedish than Ikea’s corporate tax avoidance and refusal to contribute to the country’s collective prosperity.

Still, Ikea’s Swedish defenders, including the government, claim that the furniture giant does a fantastic job of promoting Sweden and benefits the country in the long term. This argument, however, does not justify Swedish government promotion of a Dutch-Luxembourgian company. Instead, it points to a clear hypocrisy in which multiple governments around the world engage: telling citizens it is their national and legal duty to pay taxes in order to finance schools, roads, hospitals and defense while time bending backward to create a business-friendly environment in which corporations provide little to nothing for crucial infrastructure and services.  

In other words, two distinct rules: one for its citizens and the other for corporations.

Ultimately, the case of Ikea is about image and national branding. Ikea leverages its Swedish roots to market a social democratic corporate image. To be sure, Ikea has Swedish playrooms for children in their stores, but that doesn’t mean it will pay its fair share of taxes so that governments can provide real playrooms for children in the communities where the company operates. Despite the obvious irony, the Swedish government uses Ikea to brand little Sweden as a nation of big innovation and even bigger businesses. The strategy has certainly worked for Ikea, which in 2013 had a profit of more than $4 billion. However, it is unclear how or if this supposedly win-win strategy worked for Sweden and Swedish taxpayers. 

One thing is clear: Ikea’s hypocritical link to Swedishness extends only as far as such an association is profitable. Ikea appears comfortable abandoning its supposedly cherished national identity in favor of greener, lower-tax pastures when its bottom line is affected.