Extensive efforts by Nike to shift profits from high-tax countries to no-tax countries and minimise its tax bill internationally have been exposed.
An investigation by Four Corners has revealed intricate workings of the world's largest sportswear retailer's tax manoeuvring, based on 13.4 million documents revealed in the Paradise Papers leak.
The investigation, in conjunction with the International Consortium of Investigative Journalists from documents obtained by German newspaper Suddeutsche Zeitung, shows Nike's Australian arm is owned by — and pays large amounts of money to — Nike companies housed in the low-tax destination of the Netherlands.
The company's own filings show that Nike has only paid tax of 1.4 per cent on accumulated global offshore profits of $US12.2 billion.
But how do they do it?
Let's have a look...
Take this pair of Nike shoes for example.
A chunk of the money you pay goes straight to the retailer to cover their costs and profit.
So now we're left with the money Nike makes wholesaling a pair of shoes.
Say that figure is a nice, round $100 — that money takes a surprising journey.
About $80 of that will go to a Nike company in the Netherlands.
Why the Netherlands?
It could be because Nike likes tulips and bicycles.
Or it could be because Nike prefers the Dutch tax regime.
Remember, if you make a dollar of profit in Australia, you have to pay 30 cents in tax.
In the Netherlands, if you play your cards right, you may not have to pay a cent of tax — and get to keep all your profit.
From the $80, Nike pays for the manufacture of each pair of shoes in factories it subcontracts in countries such as Vietnam, Indonesia and China.
While Nike's manufacturing costs aren't publicly available, a report from German consumer group Stiftung Warentest, calculated the average price of manufacturing and transporting for some of the top athletic shoe manufacturers was about $36.
From that $80 Nike also pays about $17 in royalty payments — a figure based on company disclosures — to the Dutch company called Nike Global Trading BV.
And Nike passes on its royalty payments to another company in the Netherlands, Nike Innovate CV.
Nike Innovate CV is a very weird tax animal: while it is a Dutch company, it has no home address for tax purposes.
Dutch tax experts say the structure enables what is known as "double non-taxation" — a complicated way of saying the company doesn't pay tax.
That estimated $17 pays for the brand. It's for the use of things like the Swoosh or the Air bubble under your heel.
It's for any number of features that Nike has taken a reported 4,200 patents for worldwide.
It means that for years Nike's operations outside the United States have been sending billions of dollars offshore, first to Bermuda and then more recently to the Netherlands.
Nike now reports figures showing that of the $US12.2 billion in profits it has made from all these royalties, it has paid about 1.4 cents in the dollar in tax.
No wonder Nike likes the Netherlands.
Now let's go back to the $100.
After Nike has sent the $80 to the Netherlands, it spends about $18 to distribute and sell its shoes in Australia.
So there is only a very skinny profit left in Australia: just over $2 for that $100 pair of shoes.
When you add it all up, Nike in Australia generated almost $500 million in revenue but made about $11 million in profit in 2016.
Tax activists ask why it is that Australia makes $2 in profit from that $100 but Nike in America makes about $14 in profit.
"That's a pretty good indication that there's some income shifting going on," says Matt Gardner, a senior fellow at the Washington-based Institute on Taxation and Economic Policy.
So how much of that $100 ends up with the Australian Tax Office?
In 2016, it was about 89 cents.
Nike says that it complies with all its tax obligations.
Nike Australia said: "We rigorously ensure our tax filings are fully aligned with how we run our business, the investments we make and the jobs we create."
Nike is not alone in seeking out low-tax jurisdictions, and paying large sums to what are called "related parties".
Australian Taxation Office figures show almost $148 billion flowed through low-tax jurisdictions such as the Netherlands in 2013.
It's a game called "profit shifting" and it makes tax officials — and the public — angry that profits are moved from high-tax countries to very low-tax countries.
Because that's less money for roads and schools and hospitals. And fat profits for offshore companies, their lawyers and accountants.
Gardner says: "There is a strong and growing belief that government is not there to serve us and when it's documented as well as it has been that companies like Apple and Google and Microsoft — these incredibly profitable companies — are just able to use the tax system like a pinata, that just reinforces the belief that no-one cares about the plight of middle income families."
The cache of leaked documents reveals an industry designed to sell secrecy. This is one story from a Four Corners investigation into the Paradise Papers.