By: Susan Martinez

March 1, 2011

Introduction

Relations between the Fijian government and FIJI Water have been tense since early 2008 when the new military government seemed to suddenly notice the huge exporter (accounting for 20% of Fiji’s total exports) (Dornan). Though there are a variety of disputes, I will focus on two in particular

1) The Fijian government’s belief that FIJI Water is engaging in transfer pricing.

2) The Fijian government’s repeated efforts to tax the company.

At this point both sides have lost face in standoffs, and the tension is building.

While the company may not be popular with the national government, FIJI Water is a star in its community. Since opening in 1995 it has provided a great deal of aid to the villages surrounding the bottling plant, creating goodwill that can be used to appeal to the Fijian government. Following an analysis of the above issues, I will detail my two recommendations in improving relations with the Fijian government.

Taxing Battles

When FIJI Water first opened its factory in 1995, the government at the time granted the corporation a thirteen year tax holiday. As a result, the company has paid very few taxes since beginning operations. When Commodore Frank Bainimarama rose to power in 2006, two years still remained on FIJI Water’s tax holiday. But in July 2008, without consulting the company, the Fijian government imposed a tax of $.20F per liter of water. In response FIJI Water threatened to shut down, frightening the government into retracting the tax (McMaster and Nowak 14-19).

FIJI Water’s bluffs were proven ineffective, however, when the company unsuccessfully threatened to shut down again in 2010, this time in protest of a $.15F per liter tax hike. This time the government did not back down. Ending the employment of nearly 400