Corporate taxes as ethical issue

On January 26, 2011 the Financial Times reported about new information on the IKEA corporate structure. According to this report, all IKEA stores have to pay a royalty fee of 3% of their revenues to a foundation that is under ultimate control of the the owner’s family and that is located in the low-tax country Liechtenstein.

This foundation is reported to own the IKEA trademark and to have capital reserves of up to 14.4 billion USD.

This disclosure raised concerns especially as the IKEA company originated in Sweden – a country that is famous for its comparably high taxes. And of course: Deducting a 3% royalty fee from the revenue increases cost and reduces profit – which in turn is taxable in all the countries IKEA is operating in.

The FT article acknowledges that the corporate structure seems to be perfectly legal and reports that the IKEA founder Ingvar Kamprad said, that „taxes were a cost like any other, and all costs needed to be kept to a minimum“ to fit to the company’s low-cost philosophy.

This case throws another interesting light to the ongoing discussion about the role of taxes within the broader CSR discussions. What is the social responsibility of business in terms of tax payments? Is it morally acceptable to try to search for each and every possible way to reduce taxes? Which effect might this have on the functioning of countries and societies? How do the effects of „tax engineering“ compare to the usually rather small budgets for CSR departments and/or ethical initiatives? Can and should companies do everything to reduce their taxes – as long as they don’t violate the law?

But how about individuals? Should companies behave differently from us as individuals?


Addition on November 22, 2013 (@ 15:05 CET): If this is of any interest to you – please also see here: