The House Ways and Means voted Thursday tolift the cap on the return of the excise taxes on V I rum from July 1 to Oct. 30 of this year. Delegate Christian-Christiansen said, "Chairman Archer has gone on record in favor. This means that we'll get $13.50 per proof gallon rather than the $10.50 we currently receive." Before that the measure has to go to the Senate Finance Committee and from there to the full Senate for a vote, then back to the House of Representatives for the final vote.
The rum tax issue is part of the larger CBI bill. There's only enough money left in this budget to lift the cap through October 1999, thus the three-month period, according to Christensen. "While this action today would only provide one quarter of the dollars that we would get in an entire year, it paves the way towards achieving our ultimate goal of having the cap lifted permanently," Christensen said.
The Virgin Islands Rum Industries Ltd. subsidiary plays an unusual role in the economy of the Virgin Islands. Most companies in the Virgin Islands pay a portion of their annual income in taxes. Due to the nature of federal liquor excise tax a sum larger than the profits of VIRIL or Todhunter Internatinal Inc. is paid into the coffers of the local government. Even if the Distillery receives IDC benefits more taxes are raised from its operations than it makes in profits.
The distillery while a monopoly has not reached that position due to special interest legislation but rather the burden of EPA overhead which prevents other companies from establishing in distillation. Other companies can and do and more could operate successfully downstream. V I Rums best-known proprietary brand is "Cruzan." V I Rum is also sold under dozens of brand names in the form of distributor private label two year rum.
While people are buying less spirits they are directing their purchases more and more to higher quality longer aged product. There have been multiple mergers between retailers resulting in stronger retailers who seek to differentiate themselves with exclusive brands. These larger retailers are using distributors more for logistics relative to traditional roles of marketing and finance. As a result of this flight to quality and retailer consolidation additional value-added opportunities exist in third party aging and marketing in conjunction with chains.
In light of these considerations I wish to propose that the local government revive the Virgin Islands Rum Council. The revived V.I. Rum Council would serve to advertise the product under its many labels. Hopefully some of these increased funds mentioned in your article will go to promote that which has paid to improve the St. Thomas Airport and helped to float our last governmental bond.
Richard Bond
St. Croix
