Water charge popular but has problems

It is hard to argue with the persistent public demand for bottlers of water to be charged a royalty for the resource they use. After all, those who extract minerals from the rock beneath New Zealand or fish from its exclusive economic zone have to pay a royalty for the national resources they use. In principle there is no reason water should be treated differently. The argument against charging for bottled water is one of practicality.

If we are going to be consistent, all users of water would need to be charged for it. Interestingly, the clamour for a charge is heard only about pure water in bottles. The same demand is not made of breweries or manufacturers of soft drinks who put a great deal of water in bottles. And why should only bottled water be levied. Why not water used on farms, in factories, restaurants, hair salons and indeed households? They already pay for its reticulation, usually based on the amount they use, so a charge for the water might not make much difference.

Nor would it make much difference to bottlers if they were charged the same for a litre as all other water users. Bottled water is a tiny proportion of the national consumption. If the charge was to be applied consistently, some industries that are heavy consumers of water, for washing, sluicing, irrigating and mixing (with cement for example), would feel the cost much more heavily than bottlers. A royalty would inject a substantial additional cost into the whole economy for the satisfaction of charging the bottlers.

But those arguments hold water only if consistency has to be applied. Many of those calling for a royalty on bottled water may see nothing wrong with a selective impost on that small industry. Indeed, the call is often directed only at exports of bottled water. The callers are particularly incensed that companies can take water from aquifers in New Zealand at no charge and ship it overseas. No doubt they are selling it at a good profit in places where clean drinking water is at a premium. But then, even in New Zealand bottled water sells at prices higher than flavoured and sweetened drinks. So why not a selective tax on it?

We already impose selective taxes on petrol, tobacco and alcohol and there is pressure to put one on those sweetened drinks too. Why not bottled water? One answer is the cost of collection. The bureaucracy required to monitor the output of bottling plants and collect the royalties is quite likely to absorb all the revenue collected.

The excises on petrol, alcohol and tobacco have specific purposes, to pay for roads or the social consequences of the drugs and discourage their use. It is hard to think of a particular public purpose justifying an excise on bottled water. Health benefits would argue for it to be as cheap as possible. Havelock North residents were glad of it when their piped public supply was contaminated last year.

The best social purpose for a royalty on water would be to pay for the environmental protection of fresh water sources, but that is an argument for a charge on water for all uses, especially on dairy farms. The economic impact would be severe but the call is mounting. With an election looming, it cannot ignored.