Nike is among the names that figure in the Paradise Papers. The US sportswear giant used a loophole in Dutch fiscal law to reduce its tax rate in Europe to just two per cent. Two companies based in the Netherlands concentrated all Nike's European revenues, allowing the company to avoid paying tax on profits in the countries where it actually sells its shoes.
Nike managed to bring its tax on profits down to two per cent from the 25 per cent average for European companies. To carry out this tour de force, Nike used the Dutch fiscal system and its possibilities for optimization. Under this system, set up in 2014, Nike paid itself for the right to use its brand and artificially reduced its profits, thus reducing also its taxes.
The system was so effective that it reduced Nike’s global tax rate from 24 per cent to 16 per cent in three years. European countries are asking the Netherlands to make up the shortfall.
Nike has reported its weakest quarterly sales growth in nearly seven years. Nike still gets about 70 per cent of its revenue from retail customers but has been investing heavily in e-commerce, partnering with Amazon and offering heavy discounts on its own website.