Nike earned more than $10 billion in U.S. profits from 2008 to 2015 but only paid...

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Nike earned more than $10 billion in U.S. profits from 2008 to 2015 but only paid 18.6 percent in U.S. federal taxes during this time. One way Nike manages this low U.S. tax rate is by shifting large portions of its domestic profits into offshore tax haven subsidiaries that hold its trademarks, patents, and technology. The U.S. parent company then paid royalties to that subsidiary and subtracted those payments from its own parent U.S. tax bill as business expenses. Read article https://itep.org/tax-avoidance-nike-just-did-it- again-moving-1-5-billion-offshore-last-year/. Let's create a simple example of how the tax saving may have worked (this is very simplified assuming pre- 2018 tax law, just so you understand the big picture of how tax havens work; but note, tax laws and rates change over time!). Assume Nike set up a Bermuda subsidiary to hold the Nike trademarks, patents, and technology, at a time when the U.S. corporate tax rate was 35% and the Bermuda corporate tax rate was 0%. In that year 20xx, Nike earned $10 billion in U.S. profits (before licensing payment to subsidiary), and paid $6 billion to the Bermuda subsidiary for the right to license the Nike Trademarks, patents, and technology. For questions 1 and 2, further assume that Nike does not repatriate any profit from the Bermuda subsidiary to the U.S. (again, we are keeping this really simple, no need to overthing, it's just to get the big picture point) 1. What was the total that Nike owes in U.S. income tax in year 20xx? 2. What was Nike's total tax savings in year 20xx due to setting up the Bermuda subsidiary? 3. How much would Nike owe in additional U.S. taxes if it repatriated the Bermuda profits back to the U.S. (when the U.S tax rate was 35%)? Nike earned more than $10 billion in U.S. profits from 2008 to 2015 but only paid 18.6 percent in U.S. federal taxes during this time. One way Nike manages this low U.S. tax rate is by shifting large portions of its domestic profits into offshore tax haven subsidiaries that hold its trademarks, patents, and technology. The U.S. parent company then paid royalties to that subsidiary and subtracted those payments from its own parent U.S. tax bill as business expenses. Read article https://itep.org/tax-avoidance-nike-just-did-it- again-moving-1-5-billion-offshore-last-year/. Let's create a simple example of how the tax saving may have worked (this is very simplified assuming pre- 2018 tax law, just so you understand the big picture of how tax havens work; but note, tax laws and rates change over time!). Assume Nike set up a Bermuda subsidiary to hold the Nike trademarks, patents, and technology, at a time when the U.S. corporate tax rate was 35% and the Bermuda corporate tax rate was 0%. In that year 20xx, Nike earned $10 billion in U.S. profits (before licensing payment to subsidiary), and paid $6 billion to the Bermuda subsidiary for the right to license the Nike Trademarks, patents, and technology. For questions 1 and 2, further assume that Nike does not repatriate any profit from the Bermuda subsidiary to the U.S. (again, we are keeping this really simple, no need to overthing, it's just to get the big picture point) 1. What was the total that Nike owes in U.S. income tax in year 20xx? 2. What was Nike's total tax savings in year 20xx due to setting up the Bermuda subsidiary? 3. How much would Nike owe in additional U.S. taxes if it repatriated the Bermuda profits back to the U.S. (when the U.S tax rate was 35%)? Nike earned more than $10 billion in U.S. profits from 2008 to 2015 but only paid 18.6 percent in U.S. federal taxes during this time. One way Nike manages this low U.S. tax rate is by shifting large portions of its domestic profits into offshore tax haven subsidiaries that hold its trademarks, patents, and technology. The U.S. parent company then paid royalties to that subsidiary and subtracted those payments from its own parent U.S. tax bill as business expenses. Read article https://itep.org/tax-avoidance-nike-just-did-it- again-moving-1-5-billion-offshore-last-year/. Let's create a simple example of how the tax saving may have worked (this is very simplified assuming pre- 2018 tax law, just so you understand the big picture of how tax havens work; but note, tax laws and rates change over time!). Assume Nike set up a Bermuda subsidiary to hold the Nike trademarks, patents, and technology, at a time when the U.S. corporate tax rate was 35% and the Bermuda corporate tax rate was 0%. In that year 20xx, Nike earned $10 billion in U.S. profits (before licensing payment to subsidiary), and paid $6 billion to the Bermuda subsidiary for the right to license the Nike Trademarks, patents, and technology. For questions 1 and 2, further assume that Nike does not repatriate any profit from the Bermuda subsidiary to the U.S. (again, we are keeping this really simple, no need to overthing, it's just to get the big picture point) 1. What was the total that Nike owes in U.S. income tax in year 20xx? 2. What was Nike's total tax savings in year 20xx due to setting up the Bermuda subsidiary? 3. How much would Nike owe in additional U.S. taxes if it repatriated the Bermuda profits back to the U.S. (when the U.S tax rate was 35%)?

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