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Gildan Activewear: Canadian Giant Profiled in Panama Papers

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Gildan Activewear: Canadian Giant Profiled in Panama Papers

It's been 5 years since Gildan Activewear was profiled by the Media Co-op.

At the time, we were profiling the company as part of an analysis of the largest 50 Canadian companies

Founded by the Ayoub brothers and headquartered in Montreal, the company became Gildan Activewear in 1984 after the Ayoub's sold the company to the Chamandy family. It is now the worlds largest t-shirft manufacturer employing 20,000 with plants in Quebec, Haiti, Honduras, Nicaragua, the Dominican Republic, the USA and Bangladesh.

Today, in a joint analysis between the CBC and Toronto Star, they are back in the spotlight over relevations of major tax avoidance from the Panama papers.  According to the report:

Under the guise of combating tax evasion, the federal government opened up dozens of tax loopholes that have allowed Canadian corporations to avoid paying tax on $55 billion in international profits over the last five years.

The previous Conservative government helped corporations avoid paying their fair share by turning a crackdown into a loophole, and the new government has done nothing to staunch the bleeding.

Gildan, with the political connections that come with being a major power, is profiled speficially as having reaped the rewards of this spectacularily:

The popular T-shirt and sports apparel manufacturer has declared more than $1.3 billion (U.S.) in income over the last five years but has paid only $37.9 million in tax, according to its corporate annual reports. That is the equivalent of a 2.8 per cent annual tax rate.

By its own reckoning, the company achieves this incredibly low tax rate almost entirely due to the “effect of different tax rates on earnings of foreign subsidiaries,” which reduced its tax bill by more than $384 million over that period.

The company moved its manufacturing to Honduras, where labour is cheaper, and its business headquarters to Barbados, where the corporate tax rate is 1.5 per cent.

Wait.  Did someone just say Honduras?  You might remember Honduras as the site of a coup, backed by current US presidential Candidate Hillary Clinton.

Gildan has been in Honduras for decades and constantly accused of worker abuse.  They were criticized for firing 40 union members in 2002 in the midst of deplorable and unsafe work conditions.

When the Honduran government tried to improve conditions ever so slightly in 2009, the US and Canada (through CIDA and DFAIT) backed a coup there, largely in what was assumed to be a protection of manufacturing interests. From the Media Co-op profile:

Canada did not condemn the coup, while the Honduran Manufacturing Associating (of which Gildan is a member) recognized the new government immediately.

Sadly, while Canada has supported "favorable" labour conditions for Gildan, and an impressive regime that has been set up to allow it to avoid paying taxes, it might not even be getting the 2.8% of taxes that Gildan does pay.

According to the CBC and Toronto Star investigation:

It’s not clear that any of the tax Gildan does pay — $4.9 million last year — goes to Canada. The company wouldn’t provide a breakdown of where its tax is paid.


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