A US bottled water exporter that had enjoyed a de facto tax free status in the Pacific island nation of Fiji since 1995, has finally been forced to pay up.
Once dubbed as “bottled insanity” by environmentalist, FIJI Water has been linked to tax evasion, political intrigue, and greenwashing.
Water Resource Tax
Fiji earned a record high 4.4 million Fiji dollars (US$ 2.5 million) in the first four months of 2011 from the Water Resource Tax imposed on bottled water companies. According to FGB News this is thanks to the first payment since the Water Resource Tax came into effect by Fiji’s largest bottled water exporter – FIJI Water.
The total amount in water taxes collected in 2009 and 2010 was only 295,000 Fiji dollars (US$ 166,000) and 469,000 Fiji dollars (US$ 265,000) respectively.
In 2010, FIJI Water threatened to shutdown operations after the government increased the water extraction tax from one third of a cent per litre to 15 Fiji cents (8.5 US dollar cents) a litre. The tax only applies to companies bottling more than 3.5 million litres per month and FIJI Water happened to be the only company that met this requirement. While the company was able, in 2008, to thwart an attempt by the government to impose a similar but higher water tax of 20 Fijian cents per litre, it finally agreed to pay up in 2010.
The company could no longer rely on its political and economic influence based on the claim that its exports comprised 20 per cent of Fiji’s total exports, and that it contributed about 3 per cent of Fiji’s Gross National Product.
FIJI Water has enjoyed a tax-free status, granted when the company was founded in 1995. In 2008, the Fiji Islands Revenue and Customs Authority (FIRCA) issued an temporary export ban on the company to stop its practice of avoiding tax payments using transfer pricing .
The case proceeded to the High Court, but a judgment was never handed down. The presiding judge, along with the whole Fijian judiciary, was dismissed following the High Court ruling that the interim military government was illegal.
In the Fiji Water Saga, Matthew Dornan reveals how the company uses unfair accounting practices to avoid paying tax
the Fijian subsidiary of Fiji Water sells a 12 litre carton of water for $4 US dollars to its parent company based in the United States, which then sells the water to distributors for $13 US dollars. The carton retails in the United States for anywhere from $20-$28 US dollars. This arrangement ensures that the Fijian subsidiary generates low profits and largely avoids Fiji’s 28 percent corporate tax rate. Both the parent company and its subsidiary are registered in tax havens.
The dispute between FIJI Water and the government had reached a climax in November 2010 when company executive David Roth was deported to the United States. The government accused Roth of acting “in a manner prejudicial to good governance and public order”. Roth’s deportation caused Acting Prime Minister Ratu Epeli Ganilau to resign. Ganilau had refused to issue the removal order against his friend Roth.
Prime Minister Bainimarama, who was in China on an official visit at the time, issued the notice instead. There were rumours that Roth had met with two senior military officials who represented a threat to the Prime Minister. Bainimarama took power in 2006 after a military coup and has been criticised for taking a hard line on foreign companies.
FIJI Water exports bottled water to more than 40 countries and is the favourite imported water brand of the rich and famous in the USA. Exporting bottled water from Fiji has been called been called “environmental madness“by Friends of the Earth and ”bottled insanity” by Dr. Michael I. Niman. Plastic bottles are shipped 8,000 km from China to Fiji, where they are filled with water from an artesian well, and then shipped another 8,700 km to San Francisco. In his much cited 2007 article, Pablo Päster calculated that the total amount of water used to produce and deliver one bottle of imported FIJI water was 6.74 kg and that the amount of greenhouse gasses (GHGs) released amounted to 250 g.
In response to bad publicity regarding the FIJI brand and bottled water in general, the company’s new owner Lynda Resnick introduced a promotional campaign in 2008 touting an environmental policy and plans for a reduced carbon footprint. Critics dismissed these efforts as “greenwashing”, claimimg that FIJI Water was practising “forward crediting”: essentially, giving yourself credit for carbon reductions that haven’t happened yet. An attempt to sue FIJI Water in a Californian lawsuit for deceptively marketing itself as “carbon-negative” was unsuccessful, however.
Related web sites:
- Edwin Nand, FBC, 08 Jun 2011 ;
- Matthew Dornan, The Fiji Water saga, East Asia Forum, 18 Dec 2010
- Anna Lenzer, Fuji Water: Spin the Bottle, Mother Jones, 18 Nov 2011 (update) / September-October 2009
- Jen Phillips, Fiji Water Sued for Greenwashing, Mother Jones, 07 Jan 2011
- Rebecca Tushnet, Rebecca Tushnet’s 43(B)log, 27 May 2011
- AP / Huffington Post, 30 Nov 2011