With respect to all, this issue is not all that easy to digest. Were all distillers given incentives in equal measure it might - might - be more palatable, but that is far from the case. Over the many years the cover over returns were gradual, but things changed greatly perhaps 10 years ago. At this point the return of tax dollars to the USVI and PR were used for the general public good and for general promotion of rum. That changed when monies started being funneled to Bacardi. Thus a vicious circle was established - all Caribbean rums imported paid taxes, but the USVI/PR got them back and were able to produce more rum, more cheaply, capture more shelf space, influence more distributors and... get more money back.
A viscious cycle. Then things got really bad when the USVI recently cut a multi billion dollar deal first with Diageo, and then with Fortune. This was so sweet that Diageo actually gets back about double the cost of the spirit produced. Fortune got free facilities and the ability to buy molasses at a guaranteed 12 cents/gallon compared to the market price of about $2.00/gallon. Diageo gets obscene benefits - available to no Caribbean rum, or to any small US distillers - for the next 30 years, renewable for another 30 years.
Enough for now: here's a nice quote and citation that indicate that these US subsidies to a British company have the very real potential of really hurting US farmers as well.
The Daily Caller: "In 2008, the U.S. Virgin Islands (USVI) entered a 30-year agreement (renewable for up to 60 years) with the British alcohol firm Diageo. In return for relocating its rum production facility to the USVI island of St. Croix, Diageo will receive almost half of the Virgin Islands’ rum tax money, a 90 percent income tax break, and a property tax exemption. The government will also build Diageo a new state-of-the-art distillery and guarantee — subsidize — sugar prices (sugar is a key ingredient in rum) for the next 60 years. The deal could be worth well over $6 billion to Diageo.
And it’s getting worse. According to domestic alcohol industry insiders, the USVI is now trying to convince domestic manufacturers to relocate their operations to the territory and purchase USVI bulk rum to blend into domestic alcohol products. This could destroy thousands of jobs throughout the Midwestern states as distillers move their operations to the Caribbean to take advantage of the tax breaks and subsidies. It could also cost corn producers 22 million bushels worth of demand, since corn is a major ingredient in domestic alcohol production.
Not only would such developments further line the pockets of private companies, but the resulting economic losses to the United States would be devastating."
We believe that all of us: US taxpayers, US distillers and farmers, and independent Caribbean rums ought to be concerned and in favor of a level playing field. It is certainly worth reflecting on all this and discovering what it all means.
Fiscal Cliff Deal: Diageo Wins; You, Caricom lose
in General Discussion
Posted
With respect to all, this issue is not all that easy to digest. Were all distillers given incentives in equal measure it might - might - be more palatable, but that is far from the case. Over the many years the cover over returns were gradual, but things changed greatly perhaps 10 years ago. At this point the return of tax dollars to the USVI and PR were used for the general public good and for general promotion of rum. That changed when monies started being funneled to Bacardi. Thus a vicious circle was established - all Caribbean rums imported paid taxes, but the USVI/PR got them back and were able to produce more rum, more cheaply, capture more shelf space, influence more distributors and... get more money back.
A viscious cycle. Then things got really bad when the USVI recently cut a multi billion dollar deal first with Diageo, and then with Fortune. This was so sweet that Diageo actually gets back about double the cost of the spirit produced. Fortune got free facilities and the ability to buy molasses at a guaranteed 12 cents/gallon compared to the market price of about $2.00/gallon. Diageo gets obscene benefits - available to no Caribbean rum, or to any small US distillers - for the next 30 years, renewable for another 30 years.
Enough for now: here's a nice quote and citation that indicate that these US subsidies to a British company have the very real potential of really hurting US farmers as well.
Link: http://dailycaller.com/2011/05/17/why-is-congress-subsidizing-foreign-rum-producers/
We believe that all of us: US taxpayers, US distillers and farmers, and independent Caribbean rums ought to be concerned and in favor of a level playing field. It is certainly worth reflecting on all this and discovering what it all means.