Are IKEA Kitchen Cabinets a Good Idea? Q: I'm pondering a kitchen remodel. I love the way IKEA cabinets look in the store and in photos, but I'm curious to know how Apartment Therapy readers feel about their IKEA kitchen cabinetry. Does it hold up? Are there any bugs? Do you regret not buying more traditional cabinetry? Any advice or tips you can share are appreciated. Editor: Leave your suggestions for Julia in the comments — thanks! • Have a question for our community? Send us yours with a photo or two attached (questions with photos get answered first). (Image: provided by Julia) Packing the Pax & Blinding with a Billy February 17th, 2017 | With a new baby boy on the way, we had to find a way to squeeze our 10yo and a 3D printed shoulder pads for the IKEA BUMERANG hanger January 30th, 2017 | Want to support heavy coats and sensitive clothes on your budget IKEA hangers? I got you covered December 6th, 2016 | The following IKEA hack is useful in your bedroom(s) and makes your messy (small) bedroom space liveable again.
Two Projects in One Flat: #1 The Cupboard November 8th, 2016 | After our two sons left home, we downsized to a two-bedroom flat. Shortly afterwards, one son returned home, followed by PAX Sliding Doors on Existing Condo Closet November 4th, 2016 | IKEA items used: IKEA PAX Sliding Doors, Dampeners, Striberg lights The closets in my condo had the basic mirrored sliding Built-in Pax wardrobe and nightstand September 23rd, 2016 | Materials: 2 PAX wardrobe frames (100 cm width), 1 PAX wardrobe frame (50 cm width) – with VIKEDAL mirror doors How to add PAX sliding doors on your own woodwork August 8th, 2016 | The Project: In a corner of the hallway, I decided to replace the coat rack and garden seat (not shown) Organized shoe storage without using an inch of precious floor space July 4th, 2016 | Inefficient and inconvenient access to even the tidiest looking bins, bags or expensive shoe organizers tucked away, behind or under
The NORNÄS Tie Display April 22nd, 2016 | I like to collect ties, and here is my home made tie display. Tie display units are impossible to find KALLAX Changing Room with Storage April 12th, 2016 | IKEA items used: 3x KALLAX 4×4 3x KALLAX 1×4 Other Items used: Prefinished Birch Plywood Metal Plumbing Pipe and fittings International tax schemes exposed Lend Lease's liking for Luxembourg How a European duchy makes tax bills disappear Search the #luxleaks database Despite reporting decades of miserable results, Swedish furniture company IKEA's Australian arm has earned an estimated $1 billion in profits since 2003, and almost all of it has been exported tax-free to Luxembourg and the Netherlands.Documents submitted by accounting firm PwC to Luxembourg officials help unlock one of the mysteries of Australian retailing – how the flat-pack giant could lift its sales here by 500 per cent while its profits barely budged.The Luxembourg documents detail secret advance tax agreements in 2009, and identify IKEA entities that have received hundreds of millions of dollars from the Australian operation – including franchise fees, interest payments and fees for a "risk agreement" that to date has cost $260 million.
In contrast to the offshore profits, IKEA reported losing money here every year from the mid-1980s until 2002, when accumulated losses stood at $67 million. It was not until 2013, after a decade of small profits, that IKEA finally wiped out the accumulated losses to put its Australian arm in the black after 30 years of booming sales.But the real secrets of the operation lie in Europe. The finances of the privately owned IKEA group, founded by in Sweden in 1943, are tightly guarded.When Mr Kamprad moved back to Sweden last year from Switzerland, he announced that he was worth only 750 million Swedish kronor ($116 million).Outside estimates say the two sides of Kamprad's empire holds €38 billion ($55 billion) in capital, while the value of the business is put as high as €66 billion. Mr Kamprad says none of it is his: in 1982 he gave it all away to charity, in this case a charity in the Netherlands called the Stichting Ingka Foundation, (dedicated to safeguarding the future of furniture) while other entities in Luxembourg link back to Switzerland, the Netherlands Antilles and ultimately, the Interogo Foundation in Lichtenstein.Ingka has donated $430 million over the last four years to benefit children in poor countries.
This is 2.4 per cent of the $17.5 billion that the charity has earned in net profits over that time.For decades Mr Kamprad, now 88, was described as living frugally in his villa in Switzerland. A 2012 Swedish television program reported he received a cheque in the mail every month for the Swedish aged pension.While IKEA's auditor is KPMG, when the group wanted a new tax agreement with Luxembourg it turned to PwC because of its close relationship with , the Luxembourg bureaucrat who until last year made all decisions about foreign-owned companies in the duchy. In its November 2009 correspondence with Mr Kohl, PwC emphasised that there were two separate parts to IKEA: "The IKEA Group of companies and the Inter IKEA Group of companies are independent and there is no common ownership or common management. The two perform different activities."The International Consortium of Investigative Journalists has led a review of the documents by more than 80 journalists in 26 countries. French journalist Edouard Perrin first reported on several files for the France 2 television channel.
The documents describe how IKEA Group owns and operates 264 IKEA stores in 24 countries including Australia, and owns the exclusive rights to develop the IKEA product range. As designer of the products it holds the intellectual property and thus can charge a mark-up when it sells the products to stores via IKEA Supply AG.It works like this. From 2002 to 2013, IKEA Supply AG charged the Australian arm $2.67 billion as the cost of products. These were sold in the Australian stores for $4.76 billion. After other costs IKEA ended up with total pre-tax profits of $103 million for the period, on which it paid $31 million in tax. An honest 10 per centTo put this into perspective, the worldwide IKEA Group prides itself on maintaining a minimum 10 per cent profit margin on sales each year.In Australia, that would mean it must have earned $460 million in profits from 2003 to 2013.For IKEA to maintain its 10 per cent margin on sales, it must have factored in a profit margin of at least $360 million into the cost it charges the Australian stores for its products.
There is nothing noteworthy in this, except that it appears IKEA doesn't pay a great deal of tax on it.Apple has iPhones manufactured in China and adds a hefty mark-up in the price by the time its products reach Australia, taking its profit well before the Australian Tax Office goes anywhere near it.But that's all Apple does whereas IKEA's tax minimisation strategy has just begun.It's an expensive process running a major retail operation while at the same time developing a string of new mega-stores, as IKEA has done.But alongside these understandable expenses, between 2002 and 2013 another $532 million was paid offshore.Almost all of these payments appear to end up with the other part of Kamprad's empire, Inter IKEA Holding SA, in Luxembourg.While the IKEA Group holds the intellectual property for IKEA products, Inter IKEA Systems BV holds the intellectual property on the stores.It is "the owner of the IKEA concept and ensures that IKEA concept know-how is continuously developed, transferred and made available to all IKEA franchisees," the PwC Luxembourg documents say.
"The purpose of the [Inter IKEA] Group is to secure independence and longevity, and through Inter IKEA Systems BV control, safeguard and develop the IKEA concept. We seek to contribute to the IKEA vision to create a better everyday life for the many people [sic]."Inter IKEA Systems BV charges 3 per cent of the retail price of every IKEA product, no matter how cheap, to pursue this noble aim. So in 2008, when IKEA global sales totalled €22.49 billion, €747 million flowed in franchise fees to Inter IKEA Systems BV, virtually all of it tax-free.In Australia, from 2002 to 2013, franchise fees totalled a more modest $159 million. IKEA meanwhile was funding its ambitious building program for new stores.From 2006 it began including under "financial expenses" a figure for "Payment under Risk Agreement". That amount was $312,000 in 2006, but by 2008 it had grown to $54 million.Intercompany loansThis coincided with rises in intercompany loans that replaced bank funding. IKEA Group has huge cash reserves, but from 2002 to 2013 it paid $114 million in interest and $260 million for the Risk Agreement.As it happens, in addition to charging franchise fees the Inter IKEA Group provides finance for the IKEA Group.
And this is where the problem arose that led PwC to write to Luxembourg's Marius Kohl on November 11, 2009.The company at the heart of IKEA's finance operation was a Netherland Antilles company, Inter IKEA Holding NV, which in turn loaned money to a Belgian company, Inter IKEA Treasury SA, and to Inter IKEA Finance in Luxembourg. The Australian intra-company interest payments would eventually find their way into this structure, as virtually tax-free income.But, under pressure from the Economic Union, both Belgium and Luxembourg had been forced to make changes to tax laws which would close the loopholes for finance companies that IKEA had exploited, with effect from January 1, 2010.PwC's solution for IKEA was a subtle transformation. Inter IKEA Finance Holdings SA would be turned into a "Société de Participations Financières" as the new centre of financial activities with tax advantages, after opening a branch of Inter IKEA Finance in Switzerland.Under Luxembourg law, PwC stressed that no interest expenses paid in Switzerland could be claimed against Inter IKEA Finance's Luxembourg income.
Of course, profits in Switzerland could not be taxed in Luxembourg either.Over time the Belgian company would forward up to €6 billion to Inter IKEA Finance Holdings SA – though to the Swiss branch, with only €6 million remaining in Luxembourg.While it appeared from the outside that Inter IKEA Finance was a Luxembourg company enjoying all the benefits of an EU-member country, in effect it was now Swiss.There were a few ends to be tidied up. Inter IKEA Finance's balance sheet showed assets of €229 million.It had another look at the investments and decided to revalue them – by €5 billion. It now proposed to pay out the €5 billion to its unnamed shareholders as a "repayment of fiscal capital", which was tax free and did not attract a withholding tax.How did this all work out for Inter IKEA Finance? The Luxembourg documents show the company's 2011 tax return, when it paid "wealth tax" of €199,170, and income tax of only €1,575.What did this mean for Australia? It was pretty much business as usual.
A spokeswoman for IKEA Australia said it was not the company's policy to comment on transactions and payments. "In Australia, two stores, in Perth and Adelaide, are operated by a non-IKEA Group company," she said.These also pay franchise fees, which presumably would boost overall returns beyond those calculated here.The three payments by IKEA Pty Ltd – franchise fees, interest and the risk agreement – total $532 million from 2002 to 2013.They are separate from the 10 per cent margin that IKEA Group targets because the Inter IKEA group of companies that benefit as previously noted are independent with "no common ownership or common management". Together with the pre-tax profits here, the Australian earnings for IKEA have been close to $1 billion. With negligible tax paid offshore the $30.7 million of Australian tax paid represents a tax rate of 3 per cent.Meanwhile the group has earned operating cash flow over that time of $600 million.In 2013 alone the operating cash flow was $118 million.