Monday - November 29, 2010

John Galt Leaves Paradise

Fiji Water on Monday closed its operations in the South Pacific country that gives the popular bottled drink its name, saying it was being singled out by the military appointed government for a massive tax increase.

A company statement announcing the decision did not say whether the company was shutting down permanently in Fiji, where an acquifer deep underground has been the source of one of the world’s most popular bottled water brands. The company, owned by California entrepreneurs Lynda and Stewart Resnick, said it was closing its facility in Fiji, canceling orders from suppliers and putting on hold several construction contracts in the country.

But the company wanted to keep operating in Fiji and was willing to hold discussions with the government about that, said the statement, issued from the company’s headquarters in Los Angeles.  In the statement, Fiji Water president John Cochran said Fiji’s government announced last week that it was imposing a new tax rate of 15 cents per liter on companies extracting more than 3.5 million liters (920,000 gallons) of water a month — up from the current one-third of one percent rate. Fiji Water is the only company extracting that much water.

“This new tax is untenable and as a consequence, Fiji Water is left with no choice but to close our facility in Fiji,” the company, which sells its bottled water in more than 40 countries, said.

The tax rise comes amid a deep downturn in Fiji’s economy that is blamed on political instability following a coup in 2006 by armed forces chief Commodore Frank Bainimarama — Fiji’s fourth coup since 1987. Key trading partners have imposed various sanctions on the government, including European Union restrictions on the vital sugar industry.

Bainimarama’s government has also taken a hard line with foreign companies. Rupert Murdoch’s News Ltd. in September sold its controlling stake in Fiji’s main daily newspaper after the government imposed strict new foreign ownership limits on media companies. Bainimarama did not immediately comment on Fiji Water’s statement.

Cochran said Fiji Water was the only company that would be affected by the tax increase.

Funny how some businesses are. Even ones like this one with what I assume are fairly low overhead and high profit margins. Hit them up with massive tax increases that put them on the far side of the Laffer curve, and they say to heck with it. Even if they could eat that new tax rate and still show a fat profit, or if they could jack up the price of their product to offset it and not impact sales.

Yes, this is perhaps a bit of gamesmanship. And I doubt that Fiji Water employs tens of thousands of locals. Probably only a hundred or even less. And the owners are raking it in. But you have to stand up to tyrants of all stripes. So I hope they take their pumping and bottling machinery with them and sail away. I wasn’t aware that sleepy little Fiji was ruled by a junta either. Screw that. Guess I’ll be crossing Fiji off my list of dream vacation spots.

Posted by Drew458     on 11/29/2010 at 10:23 AM   
Filed Under: • Taxes • Tyrants and Dictators •  
• Comments (3) • Trackbacks(0)  Permalink •  

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