He didn't really care about money personally, or at least not the material things money can buy. At least that's the image he worked very hard to portray by driving an old Volvo, living in a modest house and wearing clothes bought in a second hand store etc. He obviously cared a lot about his companies making as much money as possible. Although if you asked him he'd probably say that all that tax avoidance was just him being frugal.
"It was not exactly so, as reporters found. His home was a villa overlooking Lake Geneva, and he had an estate in Sweden and vineyards in Provence. He drove a Porsche as well as the Volvo. His cut-rate flights, hotels and meals were taken in part as an exemplar to his executives, who were expected to follow suit, to regard employment by Ikea as a life’s commitment — and to write on both sides of a piece of paper."https://www.nytimes.com/2018/01/28/obituaries/ingvar-kamprad...
He owned several luxury houses and most certanly never bought 2nd hand clothes even if he wore simple clothes. So it was a carefully crafted image, not what he actually did.
It was obviously a well crafted image, but hardly one invented out of whole cloth. For example non of the three homes he owned[0] would classify as luxury by any reasonable rich person standard. His 'luxury' house in Switzerland was probably not even among 10 most expensive houses in town and was significantly smaller than most billionaires garages. His house in Sweden is in the middle of nowhere, the sort of place where 'no one' wants to live and you can pick up large swaths of land for very little money.
edit: here is a picture of "luxury villa" in Switzerland: https://w.cdn-expressen.se/images/7d/e2/7de2bbfb59044fe6bfc3... Don't get me wrong it's a nice place and something for a reasonably successful doctor or lawyer to aspire to, but hardly screams "one of the 20 richest people in the world".
[0] The vineyard was technically owned the Ikea Foundation and not by him personally, and since the wine they produced there was sold at the restaurants at his stores the whole thing was probably considered a business expense for tax purposes. Because that was how he rolled
Ok. But when why not donate the tax savings to an org that can use it
Technically the IKEA Foundation (www.ikeafoundation.org) is that charitable organisation. And technically they do donate a bunch of money each year to various causes. Of course they're not the most transparent of organizations so it's hard to really judge their philanthropic efforts.
Maybe "Money doesn't motivate me" would be more accurate?
At the risk of trying to psychoanalyses a man know very little about,I'd say that "personal wealth doesn't motivate me" is probably the most correct statement. He obviously cared very much about his businesses and making them as successful as possible, and as such probably cared deeply about money to the extent that they're the 'points' used to judge who's winning that game.
If he didn't care about money personally, why did he move to Switzerland from Sweden to avoid paying taxes? There is also that weird non-profit cooperative that IKEA masquerades as to avoid paying corporate taxes as well. Whatever can be said about the founder of IKEA, he really knew how to avoid taxes!
Because there is no point in being frugal if you have to pay significant corporate tax. And it helped expand "the empire" he was building, because he could reinvest everything.
He most likely hated wasting money, whether that was on excessive expenses or taxes -- it makes no difference. The money is gone either way.
I have a friend whose grandfather built quite a large retail business (in the billions). He said his grandfather was the same, including the tax avoidance. Grew up poor, made it, and hated wasting money.
> Because there is no point in being frugal if you have to pay significant corporate tax. And it helped expand "the empire" he was building, because he could reinvest everything.
Only profits are taxed, not sales. So if you "reinvest everything" you are not going to pay taxes.
You can hire more people, buy other companies, rent more equipment, etc. The net result is that the company grows but has no profits. It doesn't work if it buys real-estate, for example, as that increases the company value and the owner then needs to pay for the increase of the value of the company. But then it's on the share value increase, and not in profits.
High taxes can incentive grow as spending money to grow it's less costly than to capitalize profits. That's why lowering taxes is seen as an opportunity to withdraw money and reduce investment.
Sure, but you might not want to reinvest everything today, or within the same tax year, or perhaps you can't tax depreciate an entire property in the same year, etc. Acquisitions of stock (i.e. when acquiring competitors) can't also generally be offset against corporate tax.
There will always be some 'leakage' and taxes to be paid. Non-profits are generally exempt from all corporate taxes. If you don't care about putting profits in your pocket, they tend to be very tax efficient.
In the case of Ikea, a royalty on all sales (for use of the brand name) is paid to a low taxed for-profit entity. That's how he made his money. The larger the empire, the more royalties he gets, so the structure does make some sense. Not as perfect as running a pure for-profit entity, but probably one of the most tax efficient.
But you said there's no point in being frugal if you are paying significant corporate tax. If you have a heavy tax burden surely it is important to allocate your remaining resources frugally?
I'm saying option a is better than option c) spend wastefully because you pay high taxes.
Your comment seemed to advocate for this third option.
I now understand your meaning to be "paying high taxes is not frugal" which I disagree with for other reasons. Specifically paying unnecessary taxes would not be frugal but a company can still be frugal and pay high tax rates. To put it another way I do not believe tax avoidance is a frugal necessity.
Perhaps I phrased it wrong -- I believe, if you are a person who is extremely frugal, you will also automatically want to reduce your tax liability. Because at the end of the day the result is the same: an expense means money leaves the business, taxes mean that money leaves the business.
It's not necessary.. but probably a personally trait of frugal people. You reduce expenses.
You're absolutely right however that high taxes tend to incentivise reinvestment (so you can tax deduct). But too high taxes also deter entrepreneurship to some extent, because past a certain point a lot of people will feel they're working more for the state than for themselves.
Yes, of course. But only if the law says you have to; that's what legal avoidance is all about.
If you legally find a way to reduce your liability to zero (i.e. like Kamprad did), then you're also being frugal? This obviously might not be entirely ethical, but it's extremely frugal. :)
It's not wasting money - his business benefited from having an educated, healthy, safe workforce; from having roads to deliver products and customers to stores; and from a justice system to enforce laws and protect all of that property. He was just greedy and didn't want to pay his fair share.
That was his image, he and his family owns a company in the tax haven that is the Netherland Antilles, which on a yearly basis receives 3% of the total turnover of IKEA in a brand name licensing deal.
