A study of tax minimization strategies in multinational companies : with focus on The Coca-Cola company and IKEA

摘要

In this thesis we study how multinational companies are using various strategies in order tominimize their total tax burden. We use theory and relevant literature to describe some of thestrategies available, and we also confirm that these strategies are in fact being used on aglobal scale.By studying two of the largest companies in the world, respectively The Coca-ColaCompany and IKEA, we are able to see how some of these strategies are used in real life. Bystudying these two companies, we find that both show signs indicating an aggressive use oftax minimization strategies. The lack of transparency and the complicated organizationalstructures we have found are both clear indications that aggressive tax planning is beingused. By locating the concentrate operation in a tax haven, we believe that The Coca-ColaCompany is able to keep massive amounts of income outside of the United States, free oftax. This strategy is possible by having the parent located in Delaware, a high secrecyjurisdiction known for offering easy access to tax havens. Tax havens and high secrecyjurisdictions are also common denominators for IKEA´s corporate structure, which includesboth a foundation and holding companies located in tax havens such as the Netherlands, TheNetherlands Antilles and Luxembourg. By funnelling royalty payments through shellcompanies and into holding companies in tax havens, as well as shifting profits away fromhigh tax jurisdictions by using aggressive transfer pricing and internal debt; we believe thatthe companies able to save massive amounts of taxes.The problem of companies being able to avoid taxes is the result of a malfunctioning globaltax system, where various loopholes are easy to exploit. The lack of a commonunderstanding between all jurisdictions, where some deviate from the others in order toincrease income, is a problem that needs to be solved. As we describe in the last chapter ofour thesis, several actions have been and are to be taken in order to prevent companies fromdodging taxes. Most countries are now on board for a new global transparency agreement,and there is reason to believe that we will see changes in the near future, hopefullyincreasing the total amount of tax paid at a global scale.