Fiji Water agrees to new tax and re-opens plant in Fiji

Fiji Water may not leave Fiji after all.

Less than 24 hours after closing its bottling plant because of a new government tax it called “discriminatory,” Fiji Water decided to reopen for business in Western Viti Levu. In perhaps a conciliatory gesture, representatives of the US-based premium water company also met with Fiji’s Attorney General Aiyaz Sayed Khaiyum and leader Frank Bainimarama, who came to power in a 2006 coup.

The decision was hailed by Bainimarama, not least because Fiji Water’s 400 employees will keep their jobs but the additional tax revenue could add another $11.7 million US to government coffers. Fiji Water said it would comply with the country’s Water Resources Tax that charges $15 cents (8 US cents) per liter if it extracts more than 3.5 million liters per month. The company presently pays .18 US cents per liter of water it extracts. Fiji Water complained the tax was unfair because it set the 3.5 million liter threshold because no other bottler on the islands extracts that much. The bottlers falling under the threshold will continue to pay .11 cents (.06 US cents) per liter.

Display of the Fiji brand of water, photographed at a Manhattan deli, by Verne Equinox at Wikimedia Commons

About face? This reversal caps a very public fight between the country’s largest exporter and Fiji’s government, which began November 18 when the government deported Fiji Water's local representative for allegedly interfering in the country’s internal affairs. One week later, the government announced the new tax on water bottlers during its 2011 budget statement. A few days later, the company said it was shutting the doors to its bottling plant, canceling all contracts and halting several development projects.

Bainimarama then hit back with stinging criticism claiming the company makes millions in the US and other countries, but pays less than $530,000 US in corporate taxes per year. He also claimed Fiji Water under-prices its exports from Fiji by selling the water to a sister-company based in the US.

The company did not respond, but has long stated it is a good corporate neighbor, contributing $70 US million in export revenue to Fiji and provides the country with millions of dollars in development and education projects, along with supporting an estimated 4,000 people.

On to leases
Now Fiji Water’s tax status has been cleared up, Bainimarama said the government will begin reviewing lease payments of multinational companies making large profits using Fiji land. He used Fiji Water as an example, claiming the company pays $11,000 (about $5,500 US) to lease the land for its bottling plant, up from $5,000 in 1995. The country is home to a number of international resorts, all of whom make deals with local landowners for renting the land their buildings sit on. In most cases, non-indigenous Fijians cannot own land, unless in designated areas, which make up less than 10 percent of the country’s territory.

This revenue will come in handy in an economy the International Monetary Fund recently said contracted three percent in 2009 and will move up to zero-percent growth this year with one-percent growth estimated for 2011. On top of that, Fiji must repay $300 US loan to the IMF in September 2011.

Square-bottle blues
In the blogs, there was not much sympathy for the US-based bottled water company.

Anonymous posted a comment in Coup 4.5

Of course Fiji Water would reopen, they are raking in millions. It really is money for nothing for them. These people are billionaires…They WILL NOT close their money making machin. John Cochran talks about caring for the people of Fiji and it's economy..all they are caring about is filling their own pockets.
So is Frank..hopefully the 15% tax will go towards the econmy and its people as opposed to lining Frank and his cronies pockets.

Duna, commenting in Fiji Today, wrote:

Understating value minimises tax liability here and import taxes elsewhere.
Fiji Water benefits.
A carton of Fiji Water is invoiced at 25 to 40 dollars US.
The windfall profits are made there while Fiji gets peanuts.
Fiji does not have clearly defined laws on transfer pricing hence the “resource” tax.
I see this being remedied shortly.

Water under the bridge? Forget it, commented in Fiji: The Way It Was, Is and Can Be:

What the hell is going on with Fiji Water? One can only conclude that the backlash it's faced in the past 24 hours has forced it into this humiliating backdown.

US sites like Mother [Jones] have seen a wave of damaging comments from American consumers about Fiji Water's efforts to avoid tax by basing its operations in European tax havens and the Cayman Islands. Does this have anything to do with this extraordinary about face?…

Fiji Water needs to apologise to them and the nation in the traditional Fijian manner for their appalling breach of etiquette. I want to see them grovel or leave the country for good after this disgusting episode. It will certainly take them a long time to rebuild the trust of ordinary people, let alone an angry regime.

Fiji Water might be a good product but its owners are utter bastards for taking a whole nation to the brink to avoid having to pay us for a fair share of a national resource. Shame, shame, shame.

Kiwi Water?
Talk in Fiji has shifted to ways Fiji Water could get around paying the taxes. One rumor is Stewart and Lynda Resnick, the millionaire American couple who own Fiji Water, purchased in 2008 Spring Fresh brand of bottled water, based outside of Christchurch, New Zealand.
The purchase of the company in 2008, months after the Fiji’s government first proposed a levy on water bottlers, has not gone unnoticed by some bloggers and forum posters.

real jack, postulating in Fiji Board Exiles:

what we achieved is a phyrric victory…

to pay that tax they need to produce 3.5 million litres per month.

so what this effectively means is that to AVOID paying that tax – which they have clearly stated they cannot afford, they will NOT produce 3.5 million litres per month

what that means is that out water production COMES DOWN and our water exports COMES DOWN.

these guys exported $130 million worth of water last year – they do close to 60 million litres of water which is about 5 million litres a month.

which means that they will have to come down to 40 million litres of water a year to get under that 3.5 million litres per month.

thats a drop of 20 million litres. possibly more.

that 20 million litres will have to come from somewhere – because they will need to meet their distribution agreements – and that somewhere is their acquifer in New Zealand.

what this means put very simply is (a) we have a drop in our water exports – meaning less money coming to Fiji; and (b) the Govt doesn't get its hands on that 22 million in taxes it was planning to get out of that tax.

there is no win win.

Fiji Water wins.

Photo used in this post is by Verne Equinox at Wikimedia Commons


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