Ships, taxes and patriotism
By John Gray, CBC.ca Reality Check Team | Jan. 4, 2006 | More Reality Check
It was probably just a question of time before the federal election campaign got down to the fundamentals of patriotism and taxes.
And so it was Conservative Leader Stephen Harper who bristled when Liberal Leader Paul Martin questioned his patriotism and challenged his love of the country.
Harper had his own retort: "The fact is Mr. Martin lived a good deal of his professional life under the flags of other countries and Mr. Martin constantly tried – and was successful, I gather – at avoiding paying taxes in Canada. That's the record."
The Conservative leader of course is right – or partly right – but that is an accusation that has dogged Martin since he left the shipping business and got himself into politics.
For most of his career with Canada Steamship Lines, Martin's freighters operated in the Great Lakes or along the coast of the United States, flying Canadian flags, sailing with Canadian crews and paying Canadian taxes.
That changed when CSL went international, sailing the oceans of the world and competing in a business that is as rough as a business can be.
Out the window went the Canadian flag, and with the flag went the Canadian seamen. In their place came the flag first of Liberia and then of Barbados and crews from Ukraine, the Philippines and other countries of the developing world.
The reason was simple. A 1996 report of the Organization of Economic Co-operation and Development estimated that First World shipping companies save perhaps $700,000 on each ship with a Third World crew.
In her exposé of how CSL escaped Canadian wages and Canadian taxes, journalist Marci McDonald estimated that seamen on ships registered in places like Barbados are paid as little as a third of what Canadian crews earn.
Another part of the explanation is that when CSL registered its freighters in Barbados it was suddenly faced with local taxes of between one and 2.5 per cent, compared with the 28 per cent corporate tax rate in Canada.
But since the issue of reflagging first became a matter of public debate, Martin has insisted that a Canadian shipping company cannot survive any other way. If you have to compete against other companies' low-wage crews and low taxes, you have to pay similar wages and taxes.
He was defiant again yesterday when challenged about Harper's comments:
"I am very proud of having started with a small Canadian company which today builds most of its ships in Canada … has the majority of its employees who are Canadian and has its head office in Canada, yet operates around the world," he said.
"In fact, I think that that's what we want to see Canadian companies do from a Canadian base, a Canadian head office, employing Canadians, operating around the world."
The irreverent conclusion must be that when political leaders argue about patriotism, taxes and shipping, everyone will get splashed with the bilge water.