Editing Creative accounting (section)

=== Offshoring and tax avoidance ===
{{See also|Offshore financial centre|Offshore Leaks|Tax avoidance}}
In order to avoid taxes on profits, multinational corporations often make use of [[Offshore financial centre|offshore]] [[Subsidiary|subsidiaries]] in order to employ a creative accounting technique known as "Minimum-Profit Accounting". The subsidiary is created in a [[tax haven]]—often just as a shell company—then charges large fees to the primary corporation, effectively minimizing or wholly wiping out the profit of the main corporation. Within most parts of the [[European Union]] and the [[United States]], this practice is perfectly legal and often executed in plain sight or with explicit approval of tax regulators.<ref>{{Cite web|url=https://www.icij.org/investigations/paradise-papers/nikes-sweetheart-dutch-tax-deal-ignored-economic-reality-eu-says/|title=Nike's Sweetheart Dutch Tax Deal Ignored 'Economic Reality,' EU Says|website=ICIJ|date=8 July 2019 |language=en-US|access-date=2019-09-30}}</ref> 

[[Nike, Inc.]] famously employed offshoring by selling its [[Swoosh]] logo to a [[Bermuda]]-based [[special-purpose entity]] subsidiary for a nominal amount, and then went on to "charge itself" licensing fees that Nike Inc. had to pay to the subsidiary in order to use its own brand in Europe. The Dutch tax authorities were aware of and approved of this siphoning structure, but did not publish the private agreement they had with Nike.<ref>{{Cite web|url=https://www.icij.org/investigations/paradise-papers/nikes-sweetheart-dutch-tax-deal-ignored-economic-reality-eu-says/|title=Nike's Sweetheart Dutch Tax Deal Ignored 'Economic Reality,' EU Says|website=ICIJ|date=8 July 2019 |language=en-US|access-date=2019-09-30}}</ref> The licensing fees totaled $3.86Bn over the course of 3 years and were discovered due to an unrelated U.S.-based lawsuit as well as the [[Paradise Papers]].<ref>{{Cite web|url=https://www.icij.org/investigations/paradise-papers/swoosh-owner-nike-stays-ahead-of-the-regulator-icij/|title=Nike Stays Ahead Of The Regulators|website=ICIJ|date=6 November 2017 |language=en-US|access-date=2019-09-30}}</ref> In 2014, the Bermuda deal with Dutch authorities expired, and Nike shifted the profits to another offshore subsidiary, a [[Netherlands]]-based Limited Liability Partnership (CV, short for [[:nl:Commanditaire_vennootschap|Commanditaire Vennootschap]], generally known as a [[Kommanditgesellschaft]]). Through a Dutch tax loophole, CV's owned by individuals that are residing in the Netherlands are tax-free. Exploiting this structure saved Nike more than $1Bn in taxes annually and reduced its global tax rate to 13.1%; the company is currently being pursued for billions of dollars worth of [[back taxes]] in litigation by multiple governments for this multinational [[tax avoidance]].<ref>{{Cite news|url=https://www.theguardian.com/news/2017/nov/06/nike-tax-paradise-papers|title=Revealed: how Nike stays one step ahead of the taxman|last1=Hopkins|first1=Nick|date=2017-11-06|work=The Guardian|access-date=2019-09-30|last2=Bowers|first2=Simon|language=en-GB|issn=0261-3077}}</ref>