The EU on Thursday launched an in-depth probe into Nike’s tax affairs in the Netherlands, following revelations in the “Paradise Papers” scandal that exposed low tax deals for multinationals.
The investigation of one of the world’s most iconic brands, with its “Just Do It” moniker, follows a series of other tax probes targeting the Netherlands, including into Starbucks and Ikea.
A similar investigation of Apple’s tax affairs in Ireland resulted in a order by Brussels that the iPhone maker repay Dublin an extraordinary 14.3 billion euros in back taxes.
The commission, the EU’s powerful anti-trust enforcer, “will investigate carefully the tax treatment of Nike in the Netherlands, to assess whether it is in line with EU state aid rules,” Competition Commissioner Margrethe Vestager said in a statement.
The investigation will try to determine whether a series of tax agreements over almost a decade gave Nike an “unfair advantage over competitors” in the Netherlands, she added.
The investigation will focus on two Dutch-based units of Nike that the EU suspects paid tax “that may not reflect economic reality”, a statement said.
The units — Nike European Operations Netherlands BV and Converse Netherlands BV — employ more than 1 000 workers and are involved in sales and marketing throughout Europe, the Middle East and Asia, the EU said.
As a result of five tax deals made with Dutch authorities, these companies largely skirted paying royalties in The Netherlands, significantly reducing Nike’s taxable income since 2006.
Nike firmly rejected the allegations, saying that the US-based company “is subject to and rigorously ensures that it complies with all the same tax laws as other companies operating in the Netherlands.”
“We believe the European Commission’s investigation is without merit,” a Nike spokesman added.
Revelations in 2017 against Nike were among the 13.4 million leaked documents known as the “Paradise Papers” which sparked an outcry about tax avoidance by multinationals and the world’s super rich.
The Netherlands has since tried to fight its reputation as a low tax hub for corporations, pledging in November to tighten rules on tax breaks for foreign firms after facing criticism from the EU for offering complicated schemes for multinationals.
Last year a top European Union official described several European countries including the Netherlands as being “black holes” for tax and promised to pressure them to change their ways.
Pierre Moscovici lumped the Dutch in with Ireland, Luxembourg, Malta and Cyprus as countries offering complex sweetheart tax deals to help them shift profits and avoid big bills.
© Agence France-Presse