Gildan, a Canadian manufacturer and distributor of basic T shirts and sports shirts, is undergoing a transfer pricing audit by the Canadian Revenue Agency. Sophie Argiriou, director of investor relations, said: “The company has been undergoing a tax audit by the Canada Revenue Agency, as is normal for a company of our size. The audit covers the fiscal years 2000 to 2003.

“The audit is now progressing to the next stage where, in the third quarter, we will meet for the first time with the CRA to discuss transfer pricing and explain the roles and responsibilities in our foreign subsidiaries, where the majority of our taxable income is earned and which is the basis for our low overall tax rate.”

Although CRA staff have met the company’s tax specialists over the past four years, the CRA auditors have never previously met Gildan's management during their audit. A particular focus of the transfer pricing audit is the management of Gildan’s offshore subsidiaries which are responsible for its sales and manufacturing operations.

“Our allocation of taxable profits between Canada and our foreign subsidiaries, reflects the roles and responsibilities performed at each entity and is based on annual transfer pricing studies carried out by external experts,” Argiriou told a conference call on the company’s second quarter of 2008 financial results. “We are confident that the audit will not result in any material adjustments.”