I am encouraged by their comment that they are "willing to work through the Water Resource Tax issue with the government as it would be their preference to keep operating in the country" but find their comment on Fiji being "an increasingly unstable country" extraordinary.
At this stage it would appear the company and the Government are both calling each other's bluff. Not always a wise move when so much is at stake for both parties.
Fiji Water currently pays 0.33 cents for a litre of water as Water Resource Tax. The budget would have that increased to 15cents.The company uses 3.5million litres of natural water a month.
Fiji Water is putting on hold several large construction contracts in Fiji, including the renovation of Drauniivi Primary School, a $300,000 project and the resurfacing of the Naikabula Yard worth $1.6 million.
They will also cancel all contracted engineering and support services as well as their purchasing of cartons from Golden Manufacturers. The company says it represents over $130 million in export revenue, employs nearly 400 people, created millions of dollars in value through direct employment and their supplier network, and pays millions of dollars in duties and income tax.
Read on to see the official statement by Fiji Water and the response by the PM.
Official Statement from Fiji Water
John Cochran, President and COO of FIJI Water made the following statement from their Los Angeles, California headquarters on November 28, 2010.
In Friday’s budget (11.26.10), the Fiji Government announced that it will impose a 15- cent per litre tax on bottled water at locations where more than 3.5M litres per month are extracted. FIJI Water, which currently pays 1/3rd of a cent per litre, is the only bottled water producer in Fiji affected by the increased tax; bottlers who extract less than this monthly limit will continue to pay about 1/10th of a cent, or 10,000% less tax than FIJI Water.
This new tax is untenable and as a consequence, FIJI Water is left with no choice but to close our facility in Fiji, effective Monday Nov. 29, 2010. We are saddened that we have been forced to make a business decision that will result in hardship to hundreds ofFijians who will now be without work.
In addition, we will be putting on hold several large construction contracts in Fiji, including the renovation of the Drauniivi Primary School, a F$300,000 project and the resurfacing of the Naikabula Yard, worth F$1.6 million. FIJI Water will also be forced to cancel all contracted engineering and support services as well as our purchasing ofcartons from Golden Manufacturers. Finally, all ongoing purchases from local supplierswill have to be cancelled.
As a leading exporter, FIJI Water has contributed greatly to the Fijian economy. We represent more than F$130 million in export revenue for the country and employ nearly 400 Fijians at our facility. Our investment in Fiji has created millions of dollars in valuethrough direct employment and with our supplier network. We currently pay millions of dollars in duties and income tax to the Government. We also contribute over F$1.8 million dollars annually in royalty payments to the Yaqara Pastoral Company Limited and another F$250,000 annually to a trust that supports the six local villages surrounding our facility.
In addition, our company and the FIJI Water Foundation have worked tirelessly to help improve the quality of life for the Fijian people, including an annual investment of F$1 million to bring clean water to local villages, improve education and provide access to health care services for those in need.
We consider the Government's current action as a taking of our business, and one that sends a clear and unmistakable message to businesses operating in Fiji or looking to invest there: the country is increasingly unstable, and is becoming a very risky place in which to invest.
FIJI Water remains willing to work through this issue with the Fiji Government, as it
would be our preference to keep operating in Fiji.
Response by the Prime Minister
In response to the media statement by Fiji Water, the Prime Minister, Commodore Voreqe Bainimarama has said that ‘The Fiji Government remains firmly committed to both international and local investment in Fiji. However, if Fiji Water no longer wants to operate in Fiji, it must inform the Director of Lands and Yaqara Pastoral Company Limited from whom Fiji Water has leased lands.”
The Prime Minister said that “as usual Fiji Water has adopted tactics that demonstrate that Fiji Water does not care about Fiji or Fijians. They have made statements about supposed instability in Fiji and know it is not true, yet do so because they simply do not want to pay the new taxes.”
The Prime Minister said that “Fiji Water has had a corporate tax holiday since its inception until only two years ago; it has paid less than a million dollars in total corporate tax and only in the past two years (2008 and 2009); it receives approximately $FJ 4-5 million in VAT refund annually given it is export- driven; despite being a premium boutique water product, it declares the selling price of a carton of water at $US4 when at the same time other relatively unknown brands from Fiji like Aqua Pacific declare their selling price to the US market at $US10 a carton; Fiji Water sells its water to a US sister company and therefore is engaged in transfer pricing. These are the facts pertaining to Fiji Water.”
The Prime Minister said that “the positive feedback from the recent Fiji-Australia, Australia-Fiji, NZ-Fiji and Fiji-NZ business councils meetings, the positive feedback on the Budget and the new investment inflows and interest is indicative of the affirmation of and confidence in Fiji and the Fijian economy by the private sector.”
The Prime Minister said that if Fiji Water is no longer interested in Fiji then the Fijian Government, following cancellation of the leases, “will call for international tenders from credible and reputable private sector companies to extract this valuable resource.” -- No:2032 /PMO.
25 comments:
Croz,
What is extrordinary is the new issues the PM now decides to raise
1. Transfer pricing - you will recall there was a case before the courts and it looked likely on the evidence (my opinion) that Fiji Water where going to win. That all went away after abrogation of the constitution. If transfer pricing is the issue then take action on trasnfer pricing. Don't increase a new tax to punish one player. If you are upset on the transfer pricing issue still fix that.
2. The tax holiday finished two years ago. Why are government upset about this still. Will they go after the new casino operator in 10 years time because they to enjoyed a tax holiday. They may not agree with past governments decisions buy they should learn to live with them and concentrate on the future.
3. VAT refunds. If Fiji Water are operating within the law what is the issue here. Are they saying they don't like there own laws and incentives to encourage exports ? If so change it - but do it for everyone fairly.
4. The PM is dreaming if he thinks they can simply tender the area and turn on a new operator to produce those export levels overnight. It took Fiji Water 10 year and the current owners have a huge distribution business overseas. There are already other manufactures taking water from the same area.
5. What we are seeing here is a massive chip on the shoulder of the AG and RBF governor who think Fiji water don't pay enough tax. These guys don't like big business and they don't like profits. They have tried to be clever in creating a new tax to only get Fiji Water.
Croz,
From their prespective Fiji is unstable in terms of a place to invest. Transfer pricing disbutes, attacks on their previous tax holidays, attacks on their VAT refunds. I assume government has had a go at them on all these issues. They had their CEO thrown out and now a punitive tax targeted at only them !
Wake up CROZ - this is the real Fiji today.
If that isn't a AG drafted clever by half press statement I don't no what is.
VAT refunds - if you have a issue with them scap the idea. Transfer pricing - you can change the rules on that as well. Tax holidays - thats history so learn and move on - maybe stop all new tax holidays even for the beloved Chinese ?
The RA workers loss will be great but the impact on the country truely tragic. How could a government let it get to this.
Unless government are going to "take over the actual plant" it will be a long time before some one else can set up. This would certainly scare of any new investors - if government really had any line up they should have signed them up to compete with Fiji Water.....but I doubt they do.
Last time the industry lobbied together. This time the government thought they where being smart by only attacking Fiji Water. Another example of this government trying to be too smart.
Oh and the statement on the AU/NZ investors being positive. The PM really needs to learn the meaning of being polite, especially when in Fiji and from people who have hard dollars locked up here.
Perhaps the PM could list the "New Investment Flows". FTIB data suggests other wise.
The PM say FIJI WATER does not care about FIJI or FIJIANS.
Hang on a second. Look at all there clean water projects for villages. All the community involvement post flood and disaaters - even into the PM's own fund. What about the work with the six villages in the area. What about all the people they employed ? All the businesses they have helped make successful like Golden Manufacturers.
Oh and by the way Mr PM. They are a business not your private play thing. Just because you want more of there money for your own projects does not mean you can just take it.
Dear Croz and bloggers,
I have translated the PM's statement for those who are not fluent in AG speak -
(They used my own rules to their advantage so I had to create a new rule. I couldn’t change the old ones because it might have hurt others so I created a new one. Don’t they understand I am the boss, the commander. They should just learn to listen and do as I say. And I say I want more money from them period. Give it to me. Give it to me or go away.
Actually I didn’t really need it and I don’t want it. Take your bat and ball and go home.)
Hope thay helps everyone.
Croz,
From an investment point of view Fiji IS UNSTABLE and I'm not sure how you could argue anything differently ?
Croz,
I find it absolutely extraordinary that you made this comment. "but find their comment on Fiji being "an increasingly unstable country" extraordinary."
Do you not see the instability in this country?
Do you not see that investment is lower now than at any time since Independence?
Do you not see that budgets and decrees are made in isolation by the AG and the PM? There is virtually no consultation with stakeholders.
Do you not see that Fiji Economy has not had growth since 2006?
Do you not see more people are below the poverty line now than in 2006?
Do you not see the only way the government can keep a grip is through PER? Is that a sign of stability?
Do you not see the reason the blogs are so popular is because this comment would not be printed on the letters page of the Fiji Times or Sun?
Do you not see that driving out the county's biggest exporting company will lead to economic instability?
Do you not see that the Crisis in the Sugar Industry has reached new depths under this regime? Every year since 2006 production has fallen.
Do you not see why The Minister of Defence resigned because there was no evidence of David Roth indulging in Covert Political Activities. It was just a cheap cover up to get him out of the country before the budget? Is that a sign of a stable government confident it is making the right decisions.
I suppose you will say that because the PM said in his statement there are new invetment inflows we are all OK. But he does not give amounts, he does not compare them with previous years?
Do you not see people and businessmen make positive comments in public, but something totally different in private? They need their jobs they need their companies to succeed and if you criticise this Government bad things happen to you.
Do you not see that you are blind?
Perhaps the PM could outline his plan to replace $130m in export earnings ?
If has a great plan perhaps he could implement it AND keep FIJI WATER so we have an extra $130m in export earnings ?
Fiji Water has totally crossed the line with this statement, proving itself once and for all to be the ugly and unacceptable face of American capitalism.
The company's comment about the country being increasingly unstable is gratuitous, offensive and a gross distortion of the truth. It offers no evidence to support this outrageous claim, which is a direct assault on Fiji's international reputation and its economy.
Whatever the rights and wrongs of its argument with the government, Fiji Water has no right to damage Fiji's wider interests in this way. It is using its muscle in a way that reflects very poorly on its billionaire California owners, who seem to think we are some backwater that they can first bludgeon and then trash at will.
The least that can be said is that they are either very poorly advised or have no business doing business in a developing country with a fragile economy. The Government has no alternative but to call their bluff. It needs to send a powerful message to everyone that we are not a nation willing to be kicked around by rapacious outsiders.
If Fiji Water chooses to unilaterally cease production and leave the country, that's its choice. It cannot argue that it has been expelled or in any way forced to leave Fiji. So let's have no more nonsense about "unstable" countries throttling foreign investment. This is nothing of the kind. It is corporate greed, pure and simple.
Fiji Water is pushing the absurd notion of it keeping its name but sourcing its water from elsewhere. Does it really think the international consumer is that stupid? Fiji Water either comes from Fiji or it is worthless as a brand in its existing guise.
In the short term, there will be pain in Ra and to our international financial position. But this is a company that has now forfeited its right to a respected place in national life and the sooner it leaves the better.
There will be other companies keen to exploit the resource they now intend to abandon, perhaps even those French companies Evian and Perrier that Fiji Water has done so much to dislodge in the international marketplace.
The pity of it is that Fiji Water has an excellent product that has taken brand Fiji around the world. But it is our water too and if it doesn't want to pay us a fair share of its international sales, then let's find someone who will.
It's amazing, Croz, how many people here are siding with the capitalist running dogs of Fiji Water when they use their power to trash the country's reputation and deprive us of a fair share of a natural resource that arguably belongs to all. What's wrong with you guys? Wake up! Never mind the odd community project in Ra. Does anyone ask how much tax these guys are paying on their international sales beyond the country's shores? Where are those profits going? Luxembourg? The Cayman Islands? You can bet your bottom dollar the Resnick's have sophisticated tax minimisation schemes to sequester their global profits from the US tax authorities as well. These guys have tried to call Frank's bluff but they're about to get a rude shock. He isn't going to cave in, especially to bullies who insult his country and damage its economy. The Resnicks seem to think they can sell water from their operation in New Zealand under the Fiji Water brand. Go for it. They evidently don't just regard Fijians as stupid but every other bastard in the world with a bottled water fetish. Time to show these LA thugs the door.
More myopic material from your anti-fans Croz. I have this picture in my head of these crazy guys sitting at their computers hitting the refresh button on your blogsite every couple of minutes just so they can add some vomit to any fresh news you put out.
Kudos to you for having such an attentive audience!
The new water tax is not fair. Plain and simple. It wouldn't be hard to have a scaled tax level (the more you take, the more you pay) that applies to everybody.
And neither is Fiji Water and the way it does business in Fiji, fair. The PM is certainly right about it not caring for this country. The level of goodwill that it gives out to the community here is less than the refunds it receives in VAT. A joke really.
Fiji Water may have been on its way to winning the transfer pricing case, but as has been shown by the banksters in its home country, what could be considered legally ok may not be morally so.
Now I've done some quick maths, and taking $130m export revenue and assuming that 1 carton = 12 litres with a declared price of FJD$8, Fiji Water is taking out an average of over 16 million litres of water a month!
These people are, and have been laughing all the way to the bank, and at us for years!
Hopefully, however this plays out, the end result is fair for the people of Fiji.
God Bless us all.
Croz, to follow is evidence of Fiji Water's tax minimisation across a broad front, including the United States. It's an extract from by far the best piece on this stand-off by Anna Lezner at the Mother Jones website.
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Cochran noted that the company has been paying "millions of dollars in duties and income tax." Fiji Water has, however, benefited from tax-exempt status on its corporate income, granted when the company was founded in 1995 and extended ever since. Court documents submitted by the company in 2008 showed that Fiji Water was owned by an entity in Luxembourg, and recent Swiss financial records also show the Resnicks transferring Fiji Water assets to companies in Switzerland. (The company has also trademarked the word "FIJI" in the Cayman Islands.)
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Absolute proof here that Fiji Water does all it can to avoid tax. Owned by an entities in Luxembourg
and Switzerland when its owners live in Los Angeles. High time the US Internal Revenue Service put the Resnicks under a microscope.
There's also something totally obscene about these people being able to trademark the name Fiji in that other notorious tax haven, the Cayman islands. We're a sovereign country first and foremost, not a bottle of water.
Croz, I'm shocked to read the following account in today's Fiji Times of Fiji Water's appalling treatment of its workers at Yaqara yesterday.
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Many openly wept as general manager Paul Davies informed the workers that due to the imposition of a 15 cents per litre tax, the decision was made by John Cochran, president and chief operations officer of FIJI Water, to shut the factory immediately. "We were told to remove only property that belonged to us.
"Anything that belonged to FIJI Water had to remain in the factory ù we had to remove identification cards, company phones and uniforms.
"We basically walked out with the clothes we had when we walked in yesterday morning," said Timoci Ravutuva, technical team leader at the factory.
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If this is what Fiji Water dies to its local workers, then I would urge the regime to immediately escort all the company's remaining expatriate bosses to Nadi Airport and put them on tonight's plane to Los Angeles. Bastards.
On one side, I am happy to see that Bainimarama is able to stand in front of Fiji Water this time.
The only problem, is that his tax system is NOT fair.
Tax on water should be PROGRESSIVE and similar for all companies.
The first 500.000 L could be taxed at 5cents, then the next 500.000L taxed at 10 cents, etc until a maximum amount.
That would be honnest and fair.
I could accept that local companies would get a discount (20% less taxes) since Water is a Fijian resource, but if a foreign company is owned by 20% locals, then a tax rebate should apply on 20% of the water exploited by that company.
But to keep it simple, maybe a simple progressive tax system is what Fiji needs.
Reading the sad story of a shopkeeper beaten in the Fiji Times this morning (http://www.fijitimes.com/story.aspx?id=160929) and the closure of Fiji Water factory, I come to think that it might be time for the government to sterilize women after they have one child. The current population growth (native Fijians especially) has become unsustainable with a shrinking economy.
If the government is serious about improving security in Fiji, it is time to adopt a one-child policy. Fortunately, the Chineses are good friends, they could give them advice how to succed quickly in that matter.
Too many unemployed youths and young adults in a country where people are not business minded and exposed to other nations' success can prove to be dangerous.
In the midst of this idiotic posturing, Croz misses the point (which is perhaps why we never hear him on radio any more - and Field endlessly - even on the BBC last night!). "Fiji Water" was not about Fiji and about water. The state of Fiji does not own the name "Fiji Water"; it is a registered trade mark in the US - no matter what Bainimarama thinks he can do in Fiji, he has absolutely no prospect of selling "Fiji Water" in the US. He could sell Fijian water in the US, but it will have to be called something else and it will not be in the same kind of packaging. "Fiji Water" was a medium and a message; Fiji water is, well, just water.
Croz
Can you or sharon get us a copy of the roadmap so we can see what is going to fail next?
Croz, good old Michael Field is up to his old tricks again, willfully distorting the truth in a supposedly straight news story to push his own political barrow. Witness his updated story this morning for Fairfax Media's Stuff NZ:
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One of Fiji's major exporters, Fiji Water, has quit the Pacific country and its military strongman Voreqe Bainimarama has said it is good riddance.
In a statement this morning, Bainimarama, who seized power in 2006, accused the American firm of transfer pricing and not caring about Fijian people.
He has made it plain his regime intends to seize the remaining assets of Fiji Water – one of the world’s largest bottled water operations – and sell them to somebody else.
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Where in any of this did the PM say "good riddance"? And where did he "make it plain his regime intends to seize the remaining assets of Fiji Water"?
This is total fabrication and I think this guy should be reported to the regulatory authorities in NZ for willful misrepresentation. He's a complete and utter disgrace.
You can dislike Fiji Water all you like but the country needs that export money.
The country does not need Fiji Water's export money, for the pure fact that most of it goes straight back out of the country to the owners in the US (or Luxembourg or Switzerland). Very little of it goes back into Fiji, and the token charity projects are a bit of a joke compared to the amount of money Fiji Water gets. And remember, the $130m is based on $4 a case. The real profit to Fiji Water is way more than that.
Fiji will get far more revenue than it does now if Fiji Water closes down and new players come in to use this resource. Granted they will not be able to call it "Fiji Water" and will have a much smaller market share, but Fiji will still get more money than now.
The government is right to stand up to them.
On an interview with NBC program Today Desmond Tutu said "I am not interested in picking up crumbs of compassion thrown from the table of someone who considers himself my master. I want the full menu of rights.”
How appropriate these sayings are today. Fiji Waters considers itself our master and stops the crumbs.
@ Proud Fijian , for a proud nation fiji appears to be forever expecting and pleading for recognition, pleading for money and aid and demanding attention. The masters in this country are the military.
I would also suggest that Fiji Water has done more in terms of positive publicity than this regime clearly wants to acknowledge. (it it did not cost any government a cent) They created the brand, they came up with the investment capital and accepted the risk, they came up with the fantastic marketing . They can do it all over agin with any other product from another country. It's not rocket science but was clearly beyond locals to value and market their own resources.
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