IKEA and tax (or the lack thereof)

Michael Pascoe has written before about how IKEA seem to have a very unprofitable operation in Australia. In Another enormous store, but why does IKEA bother? Michael looks at the issue again:

The mystery, though, is why IKEA bothers. The Dutch (yes, Dutch) retail giant appears barely profitable in Australia. According to the most recent accounts filed with the Australian Securities and Investments Commission, IKEA's bottom-line profit margin was barely 1 per cent of the $556.6 million it took from shoppers in its 2010 year. And, as IKEA doesn't make much profit here, it doesn't pay much tax - just $2.5 million last year.

The mystery, though, is why IKEA bothers. The Dutch (yes, Dutch) retail giant appears barely profitable in Australia. According to the most recent accounts filed with the Australian Securities and Investments Commission, IKEA's bottom-line profit margin was barely 1 per cent of the $556.6 million it took from shoppers in its 2010 year. And, as IKEA doesn't make much profit here, it doesn't pay much tax - just $2.5 million last year.
A greater mystery for me was the way the company's cost of sales blew when other Australian retailers' gross profit margins were doing very nicely out of our appreciating currency. IKEA's revenue rose by $23 million but what it paid for stuff jumped by $38.6 million. Despite all those lost-looking souls queuing at checkouts, the company's gross profit margin fell from 44.7 per cent in 2008 to 40.5 per cent in 2009 and 35.6 per cent last year.

He then looks at IKEA's ownership:

It's an odd business - just like IKEA's ownership. The once-Swedish corporation is now housed in the Netherlands, where it is owned by a ''charitable foundation'' that receives very little of the many billions of IKEA's global profit and disperses even less for good works.

Far be it from me to say that IKEA is seeking to minimise it's tax (is that a euphemism of avoid or evade), but obviously it is. Perhaps the ATO needs to look at transfer pricing at IKEA. Mind you, this sort of thing is not that uncommon.

Edit 25/10: A Guardian article - Quarter of FTSE 100 subsidiaries located in tax havens. I have to say that when I read this Guardian article, it occurred to me that just because a multinational company has a subsidiary in a jurisdiction "that offer low tax rates or require limited disclosure to other tax authorities", it doesn't necessarily mean that the subsidiary is there just to allow the parent to avoid tax. It might well be there for legitimate reasons.