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AFL-CIO Pressures Nike to Pay Their Taxes

The AFL-CIO is launching a shareholder proposal to force Nike and other big companies to change their tax avoidance policy

Brian Young's picture
Nov 27, 2017

For years, many on the left have been alleging that companies have been storing profits in low tax countries to avoid paying taxes in the United States. While there was a lot of circumstantial information, the release of the “Paradise Papers” has given investors proof. Now the AFL-CIO is going after one of the largest companies in the United States to demand they stop this behavior.

Here is how the legal scam worked. Nike transferred ownership of its famous Swoosh logo trademark to a subsidiary that was incorporated in Bermuda, a country with a very low corporate tax rate. They then charged their subsidiaries in Europe and the United States royalties, which converted profit’s made by the European and US branches into accounts payable, thus reducing their tax rate. By moving the money around within the company, the profits were the same, but Nike ended up paying almost no taxes. According to the AFL-CIO, this tax evasion has cost the United States $4 Billion in taxes.

In response to this stunning revelation, the AFL-CIO has issued a shareholder proposal asking the company to stop this practice. The AFL-CIO, along with Domini Impact Investments, owns 500,000 shares of Nike through various pension funds. The proposal, which will be taken up at the companies 2018 shareholders meeting, asks the company to adopt responsible tax principles that include:

  • Consider the impact of the tax strategy on local economies and government services that benefit Nike
     
  • Annually review Nike’s tax strategies
     
  • Review how the public views Nike’s tax strategy
     
  • Ensure that Nike seeks to pay tax where the value is created

The AFL-CIO believes that this new policy will not only help the local economies receive the proper tax revenue but will also help Nike’s reputation.

Thanks to the large pension funds that the AFL-CIO and their member unions operate, they are able to wield enormous power within many large companies, even if they aren’t union. The AFL-CIO is already planning on exerting this power against some other major companies that were named in the Paradise Papers including Facebook, Alphabet (Google) and Allegan.

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