Sportswear giant Nike is among the multinational corporations accused of moving profits into tax havens, according to a landmark worldwide investigation into tax evasion.
The biggest ever leak of secret documents – 13.4 million emails, bank statements, court documents and client records dubbed the Paradise Papers – has put the spotlight on the ways politicians, celebrities and companies are dodging paying tax.
ABC’s Four Corners on Monday night revealed Nike sold around $500 million of sportswear in Australia last year, but recorded profits of just 2 per cent of its sales, therefore paying just $4.5 million in tax.
Matthew Gardner, from the Institute on Taxation and Economic Policy, told the program that, internationally, Nike had about $US1.5 billion ($1.96 billion) of profits “on which they’re paying virtually no tax”.
According to the Paradise Papers, the rights to Nike’s ‘swoosh’ logo and shoes were held in companies registered in Bermuda and maintained by offshore law firm Appleby – where seven million of the Paradise Papers originated.
Nike recorded billion-dollar profits in Bermuda, despite there being no stores in the country, according to the Four Corners investigation.
Nike moved away from Bermuda three years ago and now uses companies in the Netherlands – another low-tax jurisdiction.
Nike told Four Corners it abided by tax regulations. The New Daily has contacted Nike for comment.
The documents – exposed by a joint partnership called the International Consortium of Investigative Journalists (ICIJ) following a data leak obtained by German newspaper Süddeutsche Zeitung – relate to Appleby, Singaporean firm Asiaciti Trust, and 19 corporate registries and tax havens.
The Paradise Papers revealed multinational corporations were using cross-currency interest rate swap schemes to avoid paying taxes.
The scheme, which is lawful, is used to swap interest payments from one currency to another. It can often be used legitimately, but there are concerns companies are using the swaps to move profits into tax havens such as the Cayman Islands and Bermuda.
Explaining the swap scheme to Four Corners, former deputy commissioner of the Australian Tax Office Jim Killaly said: “If they’re different subsidiaries within the same group, the swap can actually be financially engineered so that the loss appears in whatever country you want it to, and the corresponding profit appears in whatever country you want that to land in.
“It’s like they’ve taken money out of one pocket and put it into the other pocket. They’ve still got the money, but they haven’t paid tax.”
The ATO has so far taken action against 19 companies over cross-currency interest rate swap schemes. The ATO has also issued 21 formal notices to Australian accountants and, asking if they helped implement the tax-avoidance schemes.
“We know and trust that most people do the right thing, and that many taxpayers identified as part of the leak will be meeting their Australian tax obligations,” the ATO’s deputy commissioner international Mark Konza said in a statement on Monday.
“However, we investigate all leads and have the resources and expertise to take action against taxpayers or intermediaries found to be caught up in the illegal use of offshore structures or providers.”
ATO officials have spent months working with partner agencies in Australia and overseas ahead of the release of the Paradise Papers in an attempt to identify possible tax avoidance.
“We anticipate further data may be published by the ICIJ and the ATO will continue to work closely with other tax administrations to share intelligence on advisers operating globally,” Mr Konza said.
The Paradise Papers have also implicated the Glencore Australia division, the Queen, U2 lead singer Bono and the estate of Michael Hutchence.
US Commerce Secretary Wilbur Ross, and one of Canadian Prime Minister Justin Trudeau’s key aides – Stephen Bronfman – have also appeared in the leak.
The Paradise Papers have also reportedly revealed the tax dealings of 120 politicians in more than 50 countries.
– with wires