Local Community Advertising
*Editor's Note: This story has been updated to provide information about Australia’s role in the reintroduction of excise tax.*
The federal government has removed the excise tax exemption, causing concern for the local alcohol beverage industry.
On July 1, the 68.8 cents per litre excise duty on fermented fruit beverages, also known as a sin tax, will be reintroduced for the first time since 2006, impacting more than 700 wineries nation-wide.
There are 370 licensed wineries in BC that together contribute $2.8 billion to BC’s economy annually, according to Wines of BC.
Every year on April 1, the excise tax is automatically increased based on the consumer price index, which Kelowna-Lake Country MP Tracy Gray has called on the government to halt.
“Canada’s alcohol producers stepped up and retooled through the COVID-19 pandemic to help manufacture products like hand sanitizer, often supplying them to the public for free. Instead of thanking them, the government is instead slapping them with yet another April Fool’s Day tax increase,” she said.
Excise tax is a duty on specific goods that has been agreed upon by all countries involved in the World Trade Organization (WTO).
The excise tax exemption was introduced by Jim Flaherty, former minister of finance, with the intention to grow Canada’s wine industry and provide incentive for investments.
Despite the exemption causing the government $42 million in foregone revenue, it has stimulated an additional $4.8 billion per year for the national economy.
In 2017, Australia’s federal government told the WTO that Canada’s excise exemption program is an illegal trading practice, which is why Canada’s federal government agreed to reintroduce the tax.
Rob Taylor, director of policy and government relations of Wine Growers Canada (WGC) fears for the outcome of this excise tax being reinstated for the first time in more than a decade.
“The majority of the wineries, especially the small ones, have never had to pay excise before and never faced it. Their business plans don't include that cost associated with it,” he explained.
WGC expects that up to 350 Canadian wineries will go out of business due to this tax. With BC wineries welcoming more than one million visitors each year, locals will feel this economic impact.
“The alcohol beverage tourism business in Kelowna-Lake Country is a major employer and economic generator for our community,” Gray said.
“Our local producers need a government that will help support their economic recovery in time for the summer tourism season, not a government that tries to knock them down with more taxes."
Similar beverages containing less than 7 per cent alcohol will have a 33 cents per litre excise tax.
Because cider is under this excise tax umbrella, Barry Rooke, executive director of Cider Canada, worries about the already low revenue from cider being decreased even more.
“Sometimes cider margins are within this area of 33 cents or 69 cents per litre, so if the sale price remains the same, it might make it impossible for any of these cider producers to generate enough revenue to stay functional,” he explained.
Taylor said WGC has been working with the government to hopefully bring forward a plan and program to help the industry stay strong.
“These are some of the most sustainable, environmentally conscious, fantastic businesses. They're the model business that you would want in Canada, and to lose those to a tax bill and to something that the government is going to recoup exponentially on an annual basis, it’s a no brainer for us,” he said.
“We have our fingers crossed.”
Local Community Advertising