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Water tax exemption a sellout

The tax exemption granted to Fiji Water and other water bottling companies

is morally wrong, says Labour Leader Mahendra Chaudhry.

He said the tax exemption was both unfair and totally unjustified when all other companies had to pay increased corporate tax and the ordinary people were faced with a 15% VAT on almost everything.

None of the arguments put forward by FRC Chair Richard Naidu and the government so far, justifies a tax holiday to an extremely profitable, multi-billion dollar foreign company, Mr Chaudhry said.

Fiji Water is a 27 year old well established, extremely wealthy company with a profit of around $63m in 2022.

Hardly any of our local companies make anywhere near this kind of profit. Many are struggling under Fiji’s subdued economic conditions but they will be required to pay their share of corporate tax, now increased to 25%.

Government must come clean and tell us why the tax exemption was given. It must also clarify what is the link between it and the Prime Minister’s meeting with the owners of Fiji Water’s parent company in Los Angeles in March.

The PM's visit was followed up by another visit in late May by Deputy PM and Minister for Trade, Manoa Kamikamica who also met with the principals of Fiji Water's parent body, The Wonderful Company, in Los Angeles.

In a statement last week Richard Naidu claimed that the tax changes “will allow foreign companies to gain tax credits in the US while still increasing the government’s tax revenue.”

“We ask Mr Naidu how can a company that does not pay corporate tax in Fiji claim tax credits in its home country? In any case, Fiji does not have a double taxation agreement with the USA.

“The tax credit rhetoric is all but a red herring. Fiji Water, on the other hand, greatly benefits from being relieved of its corporate tax burden in Fiji creating greater wealth for its $US5 billion parent company – The Wonderful Company – based in California.” Mr Chaudhry said.

This company is one of the largest privately held companies in the US with earnings of around $US5 billion ($F 11b) in 2022 – the equivalent of Fiji’s GDP. (Source: Forbes)

There is a second deceptive claim put forward by Naidu and the government. They claim that granting Fiji Water a corporate tax holiday while increasing the Water Resource Tax from 18c to 19.5c, will increase government revenue. This is false.

These are two distinct taxes and must remain as such just as excise and corporate tax are in the manufacturing sector.

Fiji Water’s $63m profit before tax in 2022 would, at a 25% corporate tax rate and without additional tax subsidies, fetch a revenue of about $16m.

Increasing the WRT from 18c to 19.5c a litre would generate an extra revenue of about $7m on the roughly 450Ml/year that Fiji Water extracts. Therefore, granting a tax holiday while raising the WRT as outlined in the budget, would be a net loss of $9m to the government.

This loss, over the exemption period of 7 years, would progressively be about a hundred million dollars noting that the company has applied to activate two more aquifers that would raise its extraction volume.

“Granting tax holidays and subsidies to well established, extremely profitable, multi-billion dollar foreign companies cannot be justified under any circumstances.

“It discriminates blatantly against our local companies many of whom are struggling to survive,” Mr Chaudhry said.

The Financial Review Committee recommended a progressive WRT, which would have no doubt reduced Fiji Water’s tax burden. The government, however, went a step further and has gifted them a tax holiday.

“How can such generosity to a wealthy foreign company be justified in the face of the pain inflicted on Fiji’s poor by raising Vat to 15%?” Mr Chaudhry asked.

“There seems to be a concerted effort to make sure that Fiji Water pays less tax despite the fact that it is a hugely profitable company that benefits greatly from the country where it extracts its product.

How then can Richard Naidu and the government think that Fiji Water underselling the people of Fiji was a good thing?” he asked.


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