Remarks by Clark Gascoigne, Deputy Director, The FACT Coalition
Press Call — Nike Shareholder Resolution on Responsible Tax Practices
As Prepared for Delivery
Good morning, and thank you for joining the call.
Last week, media outlets around the world released the Paradise Papers. The leak includes roughly 13 million documents naming approximately 120,000 individuals and companies, largely using secrecy and offshore tax schemes to dodge paying what they owe.
Among the revelations, the leak exposed the structures behind massive tax dodging schemes of well-known multinational companies, including Apple, Facebook, Uber, and — the company that brings us here today — Nike.
We have known for years that tax dodging is occurring on a massive scale — but we didn’t fully understand how it was done.
Now we do.
For years, money from Nike’s sneaker sales across Europe got shifted to Bermuda where the rights to the iconic Swoosh were held. In 2014, when Nike’s special Bermuda deal came to an end, the company reorganized and registered its logo essentially to a company located nowhere.
That’s right, Nike found a way to have stateless income – that means its profits have no home and are not taxed in any country, anywhere in the world.
This is simply outrageous.
When multinational corporations like Nike game the system to avoid paying their taxes, it’s middle class Americans and patriotic domestic businesses that are forced to pick up the tab in the form of higher taxes, increased debt, or cuts to services they use.
And when multinational corporations like Nike dodge taxes abroad, they contribute to destabilizing the very economies they rely on to buy their products.
Dodging taxes across Europe — where Nike has been able to pay just a 2 percent effective tax rate — destabilizes America’s closest allies.
And, multinational tax avoidance takes a particularly heavy toll on developing countries — which rely on corporate income taxes as a much larger proportion of government revenue — and where revenue shortfalls have life and death ramifications for millions of people.
It is estimated that offshore profit shifting costs U.S. taxpayers up to $135 billion in lost federal revenue in 2016 — and even more if you add in the loss to state revenue.
This means that, on average, each small business owner in America would have to pay over $5,000 in additional taxes to collectively make up for the federal and state revenue lost to offshore tax haven abuse by multinational corporations.
The stakes are enormous.
And yet Congress is moving forward with legislation that will make the problem of offshore tax avoidance even worse than it is today — while simultaneously creating new incentives to outsource jobs.
Both House and Senate leaders say they are addressing the offshoring problem, but both bills offer significantly lower rates for offshore profits. It doesn’t take an accounting genius to figure out that if the choice is a higher U.S. tax rate or a lower offshore rate, companies will look for every loophole to move profits overseas.
And, because of the way they’ve structured the bills, they also managed to encourage the shipping of jobs overseas. We are no longer just talking about the shifting of profits on paper, this is now about actual jobs and production moving to places like Ireland and Switzerland.
Finally, these bills reward the same tax dodging companies — like Nike — for their past offshore practices. There is currently $2.6 trillion stashed offshore by multinational corporations on which they collectively owe more than $750 billion in unpaid taxes to American taxpayers. Both of these bills give a tax break of roughly $500 billion on those profits. There is simply no economic case for letting companies off the hook for what they owe on past profits. It is an unjustified giveaway.
Instead of passing these bills which make the problem worse, policymakers should stop giving multinationals an advantage over wholly domestic and small businesses by ending the ability to defer paying taxes on offshore profits and ensuring that any bill maintains the same rate for profits earned offshore as for profits earned here at home.
The Paradise Papers has helped to expose Nike’s abusive tax practices, but they really underscore the need for multinational corporations to systemically increase tax transparency. Policymakers must require multinationals to publicly disclose their profits, revenues, taxes, and employees on a country-by-country basis.
As Congress considers major changes to tax policies, we need to ensure that policymakers (and citizens) have the information they need to understand the scale of offshore tax avoidance and the methods used by multinational corporations to dodge taxes. Beyond deterring bad behavior, requiring multinationals to publicly report their profits, taxes, revenues, and employees on a country-by-country basis, will provide lawmakers, regulators, investors, and the public with critical information.
There are currently proposals moving through the Financial Accounting Standards Board to require this sort of disclosure in corporations’ financial statements. Similar proposals are moving through the European Union. The Paradise Papers underscores the importance of ensuring that FASB — and the EU — come out with strong disclosure rules.
Clark Gascoigne is the deputy director of the Financial Accountability and Corporate Transparency Coalition (FACT Coalition).