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Did you know: IKEA owned by dubious charity?

NobleSavage

NobleSavage

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http://www.economist.com/node/6919139

What emerges is an outfit that ingeniously exploits the quirks of different jurisdictions to create a charity, dedicated to a somewhat banal cause, that is not only the world's richest foundation, but is at the moment also one of its least generous. The overall set-up of IKEA minimises tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover. And if that seems too good to be true, it is: these arrangements are extremely hard to undo. The benefits from all this ingenuity come at the price of a huge constraint on the successors to Ingvar Kamprad, the store's founder (pictured above), to do with IKEA as they see fit.
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There are usually strict laws about unjustly enriching someone using funds from a non-profit organization. If anyone who runs or manages the foundation is paid more than a fair market value for their work, then this would void the charitable/non-profit status of this foundation. It is puzzling to me to see what the benefit would be if it is being done for private enrichment. How does avoiding taxes help if you are very restricted in ability to distribute out the profits personally? The article mentions that there is a separate company that owns the trademark and charges franchise fees but, once again, if these fees are deemed excessive, it would void the charitable/non-profit status of this organization and may even subject the managers to charges of fraud. Not to mention, the franchising company is not non-profit and therefore its profits would presumably be subject to normal for-profit tax law.
 
Axulus said:
There are usually strict laws about unjustly enriching someone using funds from a non-profit organization. If anyone who runs or manages the foundation is paid more than a fair market value for their work, then this would void the charitable/non-profit status of this foundation. It is puzzling to me to see what the benefit would be if it is being done for private enrichment. How does avoiding taxes help if you are very restricted in ability to distribute out the profits personally? The article mentions that there is a separate company that owns the trademark and charges franchise fees but, once again, if these fees are deemed excessive, it would void the charitable/non-profit status of this organization and may even subject the managers to charges of fraud.
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What is a 'fair market value' for running something though? The precedent set by CEOs suggests that it is a very large sum indeed; perhaps limitless.

Sure, you could say that someone else would do it for a tenth, a thousandth or even a hundred thousandth of the amount - but I could say that about most CEOs of large corporations - If you are running the world's richest foundation, then you must be of a very high calibre, surely?

There isn't a fair market for such positions; therefore there cannot be a fair market value.
 
bilby said:
Axulus said:
There are usually strict laws about unjustly enriching someone using funds from a non-profit organization. If anyone who runs or manages the foundation is paid more than a fair market value for their work, then this would void the charitable/non-profit status of this foundation. It is puzzling to me to see what the benefit would be if it is being done for private enrichment. How does avoiding taxes help if you are very restricted in ability to distribute out the profits personally? The article mentions that there is a separate company that owns the trademark and charges franchise fees but, once again, if these fees are deemed excessive, it would void the charitable/non-profit status of this organization and may even subject the managers to charges of fraud.
Click to expand...

What is a 'fair market value' for running something though? The precedent set by CEOs suggests that it is a very large sum indeed; perhaps limitless.

Sure, you could say that someone else would do it for a tenth, a thousandth or even a hundred thousandth of the amount - but I could say that about most CEOs of large corporations - If you are running the world's richest foundation, then you must be of a very high calibre, surely?

There isn't a fair market for such positions; therefore there cannot be a fair market value.
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That is false. You have to clearly spell out how the compensation amount was determined and in accordance with fair market value (usually by showing comparisons to other organizations). If it is the largest organization in the industry, then you can pay the most, but you still have to provide solid evidence on how much additional compensation can be justified by its size by providing evidence on how much of a pay difference is typically determined by size of other comparable organizations. For an organization of this size, it usually entails hiring a third party compensation consultant that has expertise in this matter. Surely anything more than a few million dollars per year would be considered excessive (which is a drop in the bucket compared to the size of this organization). Organizations of this size are also highly susceptible to audit by the taxation authority and this is one obvious place they will look at and potentially challenge.
 
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Axulus said:
There are usually strict laws about unjustly enriching someone using funds from a non-profit organization. If anyone who runs or manages the foundation is paid more than a fair market value for their work, then this would void the charitable/non-profit status of this foundation. It is puzzling to me to see what the benefit would be if it is being done for private enrichment. How does avoiding taxes help if you are very restricted in ability to distribute out the profits personally? The article mentions that there is a separate company that owns the trademark and charges franchise fees but, once again, if these fees are deemed excessive, it would void the charitable/non-profit status of this organization and may even subject the managers to charges of fraud. Not to mention, the franchising company is not non-profit and therefore its profits would presumably be subject to normal for-profit tax law.
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It's seems under Dutch law that foundations can keep their finances private.
 
NobleSavage said:
Axulus said:
There are usually strict laws about unjustly enriching someone using funds from a non-profit organization. If anyone who runs or manages the foundation is paid more than a fair market value for their work, then this would void the charitable/non-profit status of this foundation. It is puzzling to me to see what the benefit would be if it is being done for private enrichment. How does avoiding taxes help if you are very restricted in ability to distribute out the profits personally? The article mentions that there is a separate company that owns the trademark and charges franchise fees but, once again, if these fees are deemed excessive, it would void the charitable/non-profit status of this organization and may even subject the managers to charges of fraud. Not to mention, the franchising company is not non-profit and therefore its profits would presumably be subject to normal for-profit tax law.
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It's seems under Dutch law that foundations can keep their finances private.
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The finances would still be subject to audit by the Dutch taxing authorities to ensure compliance with its non-profit laws and regulations.
 
He's been doing this since forever. Amazingly enough IKEA's main revenue stream isn't the furniture. It's the stuff around it. Especially from renting out adjoining properties.

Kamprad is a genius at thinking outside the box. He'll find and exploit any loophole and have no shame about it. He's a cool dude
 
NobleSavage said:
Axulus said:
The finances would still be subject to audit by the Dutch taxing authorities to ensure compliance with its non-profit laws and regulations.
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I'm not a Dutch tax attorney. I'm surprised you know this.
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I'm relying on common sense based on my experience with US non-profit tax law and compliance. I would be shocked if it were not the case, as non-profit status is a privilege and not a right subject to all sorts of laws and regs to prevent abuse. It would be ripe for all sorts of abuse if such organizations were not subject to audit by Dutch taxing authorities. I'm making the reasonable assumption that the Dutch aren't complete idiots and that the population would expect oversight of such organizations.
 
There are always loopholes. When they close them, new ones open up. It wasn't long ago that attorneys in the US could patent their tax strategies. I'm sure the Dutch aren't complete idiots, but they are human, and as such susceptible to regulatory capture and special interests.
 
NobleSavage said:
There are always loopholes. When they close them, new ones open up. It wasn't long ago that attorneys in the US could patent their tax strategies. I'm sure the Dutch aren't complete idiots, but they are human, and as such susceptible to regulatory capture and special interests.
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I'm not saying that they haven't exploited a loophole using this vehicle, just that I'm puzzled on the mechanism of private enrichment using this strategy. How exactly are the assets and profits funneled out of this non-profit organization into the hands of this family without abusing Dutch non-profit laws and regs? The article didn't explain. The only thing it mentioned is that the IKEA franchisees, which this non-profit organization owns, pays lots of franchise fees to the franchising corporation. However, the franchising corp would still be subject to for-profit tax laws on these fees and, presumably, the Dutch taxing authorities would be allowed to challenge an agreement that was far in excess of what is considered an "arms length" transaction among related parties. Related party transactions for a non-profit are typically subject to very strict oversight as it is one of the most frequently abused mechanisms for a non-profit to unjustly enrich a private party using the non-profit's assets.
 
I don't buy from IKEA because I don't want to support the terrorist state of Israel in any way.
http://bdsikea.wordpress.com/

Ikea shows no intention of ending delivery of its products to Israel’s illegal settlement colonies in the West Bank, a 10 December letter from the furniture giant shows.

For years, Ikea has been facilitating the delivery of products from its Israeli stores to residents of Israel’s illegal settlements in the occupied West Bank. Ikea has been informed several times that facilitation of such transport services boils down to complicity with Israel’s settlement colony enterprise.
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I understand nothing has changed.
 
And what are you guys complaining about anyway? The result is great cheap furniture. Kamprad's shady bussiness practices are a boon to mankind. There's way more evil ways to get rich.

Kamprad is your standard libertarian nut who wants to stick it to "the man" as much as possible.
 
The people that need to be blamed are the people oposed to flat rate taxes. There is something positive about legal simplicities. IKEA and Kamprad is not the problem.

On the Israeli issue. IKEA has been firm about not h
getting involved in politics...at all. They will deliver furniture to whoever wants to buy them. It's not like they're selling WMD. Who gives a fuck if Jewish settlers have to assemble their own furniture or not?
 
And you gotta love the guys dress sense. He's one of the richest men ever but dresses like a total clown. Only in cheap shit clothing that happened to be in his vicinity. Does not give a fuck.

Him getting a prestigeous award.

http://beardshop.files.wordpress.com/2014/06/ingvar-kamprad.jpg

Him getting another prestigeous award from the hand of the crown prince. This is considered a big deal in Sweden. People tend to dress up.

http://mobil.svd.se/images/img/rO0A...uLmpwZz8xNDAxMTI3MjU1MDAwfWY0MDIzZjQwMHQ=.jpg
 
DrZoidberg said:
The people that need to be blamed are the people oposed to flat rate taxes. There is something positive about legal simplicities. IKEA and Kamprad is not the problem.

On the Israeli issue. IKEA has been firm about not h
getting involved in politics...at all. They will deliver furniture to whoever wants to buy them. It's not like they're selling WMD. Who gives a fuck if Jewish settlers have to assemble their own furniture or not?
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The anti-IKEA article pointed out that the franchisee in question wouldn't make deliveries to the West Bank despite individuals there wanting to buy the furniture.
 
There could be a million reasons for that. I'm thinking safety? To the settlements they're at least under IDF protection.

There's also the issue of Kamprad being an actual Nazi in his youth. Not just involved in something similar. All the bells-and-whistles Swedish nazi. Donating money to them and everything. On familiar terms with its entire leadership. Until that movement died in 1950.

We all do stupid shit as kids. So I think this can be excused. He has since recanted and calls it a horrible mistake.

But he does have eyes on him. There's just no way he can side with any side in the Iseal/Palestine conflict.

The company is truly a multinational and that's how they like to keep it. They take no sides ever
 
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