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This Firm Avoids Taxes Abroad - And Ottawa Still Backs It

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CANADIAN MONEY
Johnny Chih-Chung Chang
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Twenty-first century "Canadian" corporate capitalism is quite the racket.

Built with public subsidies, a Montréal firm can shift its "head office" to a tax haven and workforce abroad, but Ottawa will continue to use its diplomatic, economic and military might to advance the company's reactionary international interests.

As part of its coverage of the Panama Papers, the Toronto Star recently reported that Gildan Activewear paid a legally reduced 2.8 per cent tax rate on more than US$1.3 billion in declared income the last five years, and it's unclear if any of the apparel company's measly $37.9 million in tax was paid in Canada.

After benefiting from government subsidies and financial backing from Quebec's Fonds de solidarité labour investment fund, Gildan opened a subsidiary in Barbados 16 years ago to sidestep Canadian tax. The firm took advantage of a tax treaty that permits companies to repatriate profits from the small Caribbean nation, which has a 1.5 per cent corporate tax rate, without being taxed in Canada.

Despite Gildan moving its production to low-wage jurisdictions and its headquarters to a tax haven, Ottawa has continued to advance the company's interests.

Concurrently, "free" trade agreements have enabled Gildan to shift its (unionized) Canadian and U.S. production to Honduras, Nicaragua, Dominican Republic and Haiti, where it has pursued aggressive anti-union "sweatshop" policies. Without a high-profile brand name (until recently), Gildan has focused on producing T-shirts and socks at the lowest cost possible. Any increase in the dismally low wages it pays in these countries is a threat to their ultra-low-cost production model, which competes with even lower wage jurisdictions in Cambodia and Bangladesh.

Despite Gildan moving its production to low-wage jurisdictions and its headquarters to a tax haven, Ottawa has continued to advance the company's interests. In 2004 Ottawa helped overthrow Haiti's elected government and backed a military coup in Honduras five years later partly to protect Gildan's ultra-low-wage production model.

At the start of 2003 Jean-Bertrand Aristide's government increased the Haitian minimum wage from 36 gourdes (US$1) a day to 70 gourdes. Of course, this was opposed by domestic and international capital, which used Haiti's lowest wages in the hemisphere as a way to beat back workers' demands in other Caribbean and Central American countries. At the time most of Gildan's work in Haiti was subcontracted to Andy Apaid, who led the Group 184 domestic "civil society" that pushed to overthrow Aristide's elected government.

Coincidentally, two days after the U.S./France/Canada coup, Foreign Affairs stated "some Canadian companies are looking to shift garment production to Haiti." By 2009 Gildan was the country's largest employer after the state, employing up to 8,000 Haitians (directly and indirectly) in Port-au-Prince's assembly sector.

A firm that pays little tax, low wages and that employs the state to advance its reactionary international interests -- neoliberalism at its finest.

To the west, Honduran President Manuel Zelaya raised the minimum wage by 60 per cent at the start of 2009. Gildan's opposition to Zelaya's move to increase the minimum wage was one reason Ottawa tacitly supported the ouster of the elected president's later that year. Under pressure from the Maquila Solidarity Network, Nike, Gap and two other U.S.-based apparel companies operating in Honduras released a statement that called for the restoration of democracy three weeks after the military overthrew Zelaya.

With half of its operations in the country, Gildan refused to sign this statement. Since the coup Gildan's Honduran workforce has grown from 11,000 to 26,000, making it the largest private employer in the country.

A Globe and Mail Report on Business profile described Gildan as "the ultimate fruit of globalization." A firm that pays little tax, low wages and that employs the state to advance its reactionary international interests -- neoliberalism at its finest.

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