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EU court rejects Nike’s appeal in tax probe case

An EU court on Wednesday rejected an appeal by US sports equipment maker Nike against the European Commission’s decision to open a probe into favourable tax deals in the Netherlands.

The decision by the EU’s lower General Court comes after the commission in 2019 said it would formally look into whether Nike and lifestyle brand shoe maker Converse were getting a beneficial tax deal from the Dutch.

“The Commission has neither failed in its obligation to state reasons, nor committed manifest errors of assessment,” in its decision to start the investigation, the Luxembourg-based court said.

The Netherlands is frequently on the EU’s anti-trust radar because of alleged sweetheart tax deals with multinationals.

Nike’s two Dutch-based subsidiaries are suspected by the commission of exploiting tax a loophole which allowed it to lower corporate taxes.

Nike is said to have obtained licences to use intellectual property rights in exchange for royalties paid to its two Dutch subsidiaries in the Netherlands, which were exempt from being taxed.

The practice was first highlighted in the so-called “Paradise Papers” an investigation into global tax evasion by the International Consortium of Investigative Journalists which involved 96 media outlets from 67 countries.

European anti-trust supremo Margarethe Vestager said in 2019 the number of royalties favoured by Dutch tax rulings “did not reflect economic reality.”