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Workers harvesting icebergs for Iceberg Vodka Co., a Newfoundland-based distiller that makes vodka with water melted from icebergs it harvests in Newfoundland. It was a novelty product founded in 1996 that originally sold about 10,000 cases a year. (Iceberg Vodka)
Workers harvesting icebergs for Iceberg Vodka Co., a Newfoundland-based distiller that makes vodka with water melted from icebergs it harvests in Newfoundland. It was a novelty product founded in 1996 that originally sold about 10,000 cases a year. (Iceberg Vodka)

Small Business

Business owner claims victory on Newfoundland iceberg tax Add to ...

A small-business owner in Newfoundland and Labrador is claiming victory after pressuring the provincial government to reverse a large increase in fees companies would pay to use iceberg water.

Danny Bath, general manager and part owner of the Auk Island Winery in Twillingate, a town of roughly 2,200 people located 440 kilometres north of St. John’s, has been lobbying the government on the issue. In the past, businesses have had to pay a fee of approximately $4,000 to obtain a five-year water use licence. In October of 2016, the Liberal government introduced an annual water use charge of $5,000 for businesses that use iceberg water. But Auk Winery, which uses the water to produce a line of iceberg wines, balked at the increase, saying it would negatively impact its business. Mr. Bath even vowed to discontinue the iceberg wines if the fee structure remained in place.

But that measure is no longer necessary. Mr. Bath says he got a call from Department of Municipal Affairs and Environment Minister Ed Joyce last weekend informing him the government would implement a new fee structure where businesses would not be charged for water usage if they use less than 5,000 cubic metres of iceberg water. “I took the lead on this issue and pressed the government on this. It listened and fixed the issue,” Mr. Bath said.

Only in Newfoundland and Labrador could such a dispute erupt. Every year, thousands of icebergs break off from glaciers in Greenland. They drift south through the so-called Iceberg Alley, an ocean corridor that runs from Greenland to the northeast coast of the island of Newfoundland. Over the years, a small cadre of businesses have tried to profit from these icebergs by either harvesting them or making products from the water that’s produced from the melting chunks these ‘iceberg cowboys’ round up from the sea.

Auk Island is one of those businesses, but there are others. St. John’s-based Quidi Vidi Brewery uses the water to make its Iceberg beer brand. Berg Water, also based in the provincial capital, sells a luxury brand of bottled water made from icebergs.

Mr. Bath took the stand against the increase in the annual water-use fee in large part to show the government small businesses have had enough of the tax and service fee hikes that were put in place in the 2016 budget. “I felt this increase was a little bit much, and if the government was going to charge this much extra for iceberg water usage, what fee increase was the government going to focus on in the future?” he said.

Ed Keane, an iceberg harvester and owner of Keane Marine based in the town of Bonavista, doesn’t mince words when asked about the fee increase. “It was a BS tax,” he said. Every year, from May until August, Mr. Keane heads out into the North Atlantic in search of icebergs. It can be dangerous work. Icebergs can roll or collapse at any time, causing large waves that can flip or damage Mr. Keane’s vessel.

He says there are approximately eight companies that harvest icebergs in the province and his company is the biggest, employing eight to nine employees. The fee increase would not have put Keane Marine in dire financial straits, but he says it would have hurt some of the smaller companies in the iceberg-harvesting business. “A lot of the smaller companies were going to drop off. It wasn’t good,” Mr. Keane says.

The opposition to the increase in the annual water-use fee is a sign the business community is suffering from tax fatigue, says Thomas Cooper, an associate professor with Memorial University’s Faculty of Business Administration. The Liberals introduced a series of tax and fee increases in the 2016 budget to generate more revenue to address a deficit, projected to be $778-million for the 2017-2018 fiscal year.

But Mr. Cooper says the government appears to have realized that in the case of iceberg water, the revenue it would have gained from increasing the fee would not have offset the damage it would inflict on harvesters and small businesses using the water. “There’s certainly been a big change in the fiscal picture of the province,” he says. “But you’ve got to have a competitive tax and service fee regime or businesses will go other places.”

A spokesperson for the Department of Municipal Affairs and Environment said in an e-mailed response that the department is working to have the fee change implemented “as quickly as possible.” As for why it has decided to reverse course on increasing the annual water-use fee, the spokesperson said it’s been adjusted to “support small businesses that may have been negatively impacted by the increase in iceberg water-use fees and licensing.”

With this issue resolved, Mr. Bath has big plans for Auk Island Winery’s iceberg wine. It currently produces 1,200 cases of iceberg wine annually, but he would like to increase that to 30,000 or 40,000 cases per year. He’s also looking at new export opportunities for his wine, particularly in China and other Asian markets. “Iceberg wines are going to play a more important role in what we do,” he said. “It’s a new day here.”

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