Nike loses battle to halt EU inquiry into Dutch tax deal
Catherine Newman
The investigation into Nike's Dutch tax affairs will go forward after the multinational corporation failed to block the EU investigation. /Interface News via CFP

The investigation into Nike's Dutch tax affairs will go forward after the multinational corporation failed to block the EU investigation. /Interface News via CFP


Nike has lost its fight to stop an inquiry into its Dutch tax affairs, following Europe's second-highest court backing the EU investigation that opened two years ago. The ruling means the inquiry will continue. 

The EU case was part of a crackdown on multinationals' tax deals with the bloc's member states, which Brussels says gives them an unfair advantage. The General Court based in Luxembourg dismissed Nike's challenge and said regulators in Brussels had acted properly in a procedural case against Dutch officials. 

"The European Commission complied with the procedural rules and neither failed to fulfil its obligation to state reasons nor made manifest errors of assessment," ruled the court.



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Judges said the EU executive carried out its provisional assessment of the measures at issue in a diligent and impartial matter and that it did not breach the principle of good administration. 

Nike had objected to the Commission's 2019 decision to investigate five tax rulings issued by Dutch authorities from 2006 to 2015 to the company. The company, known for its sports and street clothing, argued the Commission's investigation was premature and based on insufficient information. 

Nike, which can appeal the ruling, said in a statement: "We believe the European Commission's investigation is without merit." And added that it is "subject to and rigorously ensures that it complies with all the same tax laws as other companies operating in the Netherlands." 


What is the tax deal Nike has in the Netherlands?

The rulings, two of which are still in effect, endorsed a method of calculating royalty payments to Nike's Dutch entities – Nike European Operations Netherlands and Converse Netherlands – for the use of intellectual property.

The European Commission said the royalty payments appeared higher than those that independent companies would have agreed between themselves. This mean they have unduly reduced the Dutch entities' taxable base, giving Nike a selective advantage amounting to illegal state aid. 

Nike counter-argued that the EU competition enforcer has jumped the gun by opening a formal investigation instead of continuing its preliminary inquiry and also said it had provided insufficient reasoning to show the case constituted Dutch state aid. 

The court's decision follows 130 countries agreeing earlier in July to force large multinationals to pay a minimum corporate tax rate of at least 15 percent. On Monday, the European Commission, the EU's executive arm, suspended its plan for a controversial digital levy until September in an attempt to create a global tax agreement.

Such special treatment from member states towards multinationals has also previously concerned Apple, Amazon and Starbucks. Both Amazon and Apple won their appeals against tax-payback demands. 

In 2016, Margrethe Vestager of the European Commission said that "Ireland granted illegal tax benefits to Apple" and the tech giant was ordered to pay more than $15 billion, plus interest in unpaid Irish taxes from 2004 to 2015 to the Irish state. 

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