HILVERSUM, Netherlands — Nike’s Dutch tax deals are the latest target of an European Union crackdown on corporate tax practices as officials say the sports-equipment maker got an unfair edge over rivals.
Margrethe Vestager, the EU’s competition commissioner, said countries, such as the Netherlands, have allowed companies to set up complex structures “that unduly reduce their taxable profits and give them an unfair advantage." She’s pressing on with probes into corporate tax practices more than two years after ordering Apple to pay back billions of euros to Ireland.
The EU investigation focuses on Dutch tax treatment of Nike European Operations Netherlands BV and Converse BV which it says may have unfairly reduced the tax bill for the Nike group. The probe will weigh five tax rulings issued by the Netherlands from 2006 to 2015, two of them still in force, that calculated the royalty paid by the Nike units to use intellectual property for Nike and Converse products sold in Europe, the Middle East and Africa.
"As a result of the rulings, Nike European Operations Netherlands BV and Converse Netherlands BV are only taxed in the Netherlands on a limited operating margin based on sales," the EU said. The royalty payments "appear to be higher" than usual market terms and the units that receive the royalties "have no employees and do not carry out any economic activity."
Nike also faces a separate EU antitrust investigation into its sales practices. That probe examines whether the company illegally restricts traders selling licensed merchandise outside one country or online.
A global push for more tax transparency was fuelled in 2014 by the so-called Luxleaks revelations by a group of investigative reporters when they published thousands of pages from secret tax arrangements between Luxembourg and multinational companies including Walt Disney, Microsoft’s Skype and PepsiCo.
Nike was among another group of companies singled out later by the same group in the so-called Paradise Papers, accusing the sports brand of funnelling billions of dollars into offshore havens. The company’s Chief Tax Officer Patti Johnson in June last year answered questions by EU lawmakers about the firm’s tax practices in a special European Parliament committee looking into tax evasion and tax avoidance.
By Aoife White; editors: Anthony Aarons, Peter Chapman and Stephanie Bodoni.