Nike, Procter & Gamble, benefit from Dutch tax deals, Paradise Papers show

DutchNews, November 7, 2017

The Netherlands has helped sportswear giant Nike slash its tax bill by shifting billions of dollars in earnings firstly through Bermuda and then later solely by using Dutch tax constructions, Trouw said on Tuesday. 

The paper bases its claims on hundreds of leaked documents from offshore legal service provider Appleby which have become known as the Paradise Papers. 

Nike located its European headquarters in Hilversum in 1999 and since then, almost all non-US sales are processed through the Netherlands. Between 2010 and 2014, Nike was able to move over €1bn through the Netherlands to Bermuda. 

Since then, when that tax deal expired, the company has been using Dutch limited partnerships (commanditaire vennootschappen), which are not considered companies in the Netherlands and pay no tax, Trouw said. 

‘This involved moving the company’s intellectual property from Nike International Ltd in Bermuda to yet another subsidiary, Nike Innovate CV. This entity is not based in Bermuda. It is not actually based anywhere,’ the Guardian said in its report on Nike’s tax set-up. 

In 2006, the company was able to keep $535m in profits out of sight of the US tax authorities, but by 2016 this had risen to €12.2bn, Trouw said. 

The finance ministry has refused to comment on the Nike deal, saying it is not allowed to comment on individual tax matters. Nike told the Guardian: ‘Nike fully complies with tax regulations and we rigorously ensure our tax filings are fully aligned with how we run our business, the investments we make and the jobs we create.’ 

The papers also show that US multinational Procter & Gamble was able to cut its tax bill after a tax inspector in Rotterdam signed off on an advance tax ruling without having the proper approvals, Trouw said. 

Procter & Gamble, known for products such as Oral-B toothpaste and Gillette razors, reached the deal with the tax office in 2008. 

Under the rules for reaching advance tax deals, the agreement should have been put to a committee of experts, not agreed by a single person.  The deal allowed P&G to shift $676m to the Cayman Islands and cut its tax bill in the Netherlands by $169m, the paper said. 

Tax office

The tax office admitted to Trouw that the deal did not meet the regulations but could not say if this sort of deal has been made more often. 

‘This raises questions about how often this sort of thing happens and what sort of monitoring the tax office actually has,’ Jan van de Streek, a professor of tax law at the University of Amsterdam, told the paper. 

Tax haven

The Netherlands has been grappling with its image as a tax haven for several years and the new government has pledged to get tougher on shell companies. Some 10,000 shell, or letter-box, companies are based in the Netherlands and are primarily used to shift corporate earnings and obscure ownership. 

However, the new government’s decision to scrap the tax on dividends has come under heavy fire from opposition MPs, who argue it is a gift to foreign firms and will not benefit the Dutch taxpayer. 

The government says the move is essential to make sure the Netherlands remains an attractive location to do business. 

Bad reputation

Tax lawyer Paul Sleurink, from law firm De Brauw Blackstone Westbroek, told the Financieele Dagblad that the growing aversion to ‘aggressive tax planning’ is forcing countries to make a choice. 

The Netherlands can no longer be an attractive country for firms to base substantial international operations at the same time as serving the letter box company sector, he said. 

‘The Netherlands is being included in lists that you don’t want to be part of,’ he told the FD. ‘I have heard that other countries want to sign tax deals with us, but not if the wrong people are benefiting.’ 

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