Nike Under Scrutiny By The European Commission
Nike is the latest multinational company to become embroiled in the European Commission’s tax ruling/transfer pricing/state aid investigations. It’s probably unlikely to be the last, either.
It’s my view these investigations aren’t about upholding the state aid rules. They’re about the EU being seen to be doing something about corporate tax avoidance. Because the trouble is it’s highly likely that the tax arrangements in question are perfectly above board. So it’s on shaky legal ground from the off.
For the EU, the probes will have likely damaged its reputation as a place to do business, as for businesses the impact of these cases is less to do with tax breaks and tax avoidance as to do with tax certainty. While we can argue all year long about the rights and wrongs of corporate tax planning, corporations like to know not only what’s just around the corner tax-wise, but also what’s at the end of the street and beyond the intersection. The actual amount of tax that happens to be is just one part of the equation.
Throwing legal oil slicks in the road, as the Commission is arguably doing with these investigations, can be enormously disruptive for large companies with long-term plans and complex supply chains. Apple’s unexpected EUR13bn in tax due in Ireland, to cite one prominent example, was probably not on the company’s radar. And now Nike faces the prospect of a potentially similar charge.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look