SoVote

Context: House Hansard - 171 - Mar/22/23

Mar/22/23 8:43:40 p.m.
Watch

Uqaqtittiji, many other MPs have discussed beer distilleries in their ridings; Nunavut has one as well, NuBrewCo. This is a brewing company in Iqaluit, and it is already taxed territorially. I am concerned that this small distillery in Iqaluit will be impacted heavily by the taxes that are being proposed, and as such, I will be supporting the Conservative motion. Can the member talk about how the government will make sure that small distilleries like NuBrewCo will continue to get the federal support needed to keep operating?

87 words

Context: House Hansard - 171 - Mar/22/23

Mr. Peter Julian (New Westminster—Burnaby, NDP)

Mar/22/23 8:58:20 p.m.
Watch

Madam Speaker, I have a question and a comment from the Rheault Distillery in the riding of Algoma—Manitoulin—Kapuskasing, in northern Ontario. A minister said that there is a graduated system for the excise tax on beer, but as the member is well aware, the reality is that the government forgot about small distilleries. No matter what volume is produced, whether it be 1,000 litres or a million litres, all distilleries pay the same tax. Does the member agree that the graduated system that is used for breweries should also apply to distilleries?

99 words

Context: House Hansard - 171 - Mar/22/23

Mr. Richard Cannings (South Okanagan—West Kootenay, NDP)

Mar/22/23 9:12:18 p.m.
Watch

Madam Speaker, I will be sharing my time with the wonderful MP for Elmwood—Transcona. My riding of South Okanagan—West Kootenay is the finest in the country in many ways, but one of its best features is the thriving beer, wine and spirits sector. I think everyone here knows that we make the best wine in Canada, but we might be here all night if I were to list all of those wineries. Perhaps fewer know the sheer number and quality of craft breweries, so I would like to try to list them here, with apologies if I miss any. Abandoned Rail, Cannery, Highway 97, Neighbourhood, Slackwater and Tin Whistle are all in Penticton. There is also Firehall in Oliver, North Basin in Osoyoos, Rossland Beer in Rossland, Trail Beer Refinery in Trail, and Tailout Brewing in Castlegar. Then there are the distilleries. We have Legend Distilleries in Naramata. It used to be my old doctor's office, but it has been turned into a distillery. We have Maple Leaf Spirits and Old Order in Penticton; Dubh Glas in Oliver, where my friend Grant Stevely makes what I think is the best gin in Canada, Noteworthy Gin; Tumbleweed in Osoyoos; Kootenay West in Trail; Tonik in Crescent Valley; and Kootenay Country Craft in Winlaw. There may be more. It is hard to keep up. I was recently talking to my friends Jorg and Anette Engel, who own Maple Leaf Spirits, which is a small craft distillery in Penticton. It is one of the first craft distillers in the region, and they have taken advantage of the bountiful fruit of the Okanagan to produce award-winning brandies and other liquors. In fact, their brandy won the award for best brandy in Canada last year for the second time. As their business grew over the past 20 years, they saw other small distilleries establish in the region, and that strong growth in the craft distillery sector has been mirrored and even exceeded by the growth in the number of breweries and small wineries. This sector is therefore particularly important in South Okanagan—West Kootenay. These businesses, many of them small family-owned companies, have combined two traditional pillars of the local economy, agriculture and tourism, to create a powerful new centre of growth for the region. However, like many sectors, this sector has been hard hit recently by soaring inflation. The cost of almost everything that goes into their products has been rising. The grain that goes into beer and spirits has more than doubled in price. The price of bottles has gone up. They also share another inflation-related challenge that no other sector has to deal with, and that is an excise tax that automatically rises as inflation rises. Since 2017, this tax has gone up every year without legislation or parliamentary debate, and this year it will increase by a whopping 6.3%, the largest one-year increase in the last 40 years. Distillers like that of the Engels are going to be struggling to survive. They recently wrote me a letter, and I would like to read some of it here: Our locally produced Craft liquors are more expensive in liquor stores than imported and multi-national brands, through the Federal Excise Tax. The rates of excise duty on spirits are adjusted annually on April 1st, based on changes to the Consumer Price Index. As a craft distillery, we now pay $1.74 in excise tax for each 375ml bottle.... That is $3.48 for each 750ml bottle, or $5.22 for each 1 liter bottle. Here in Canada, Excise is further more than doubled by 167% provincial mark-ups, to burden domestic distillers with a tax barrier of approximately $9 on every 1 liter bottle in a liquor store, increasing every year. In liquor stores, our products compete with liquor from the USA, who have reduced their excise tax to a fraction of what we must pay. We see an imbalance on the market. We want our products to get priced in liquor stores on a level playing field with products coming from out of country. These concerns are shared with other distillers across the country. Marcel Rheault and Mireille Morin own Rheault Distillery in Hearst, Ontario. They have very similar concerns. They make Loon Vodka and other great products. They say they have to remain competitive, so they cannot mark up their prices to keep their margins intact. Again, this is echoed across Canada in every craft distillery, every craft brewery and every small winery in the country. I want to be clear that all of these businesses are fine with paying the excise tax on beer, wine and spirits, but they are concerned about the fairness of how this tax is now structured and calculated. On top of the escalator feature, excise taxes on alcoholic beverages produced in Canada are treated differently depending on whether they are wine, beer or spirits, and very differently when compared with excise taxes levied by our biggest trading partner, the United States. Excise taxes are much lower in the United States and are structured so that small producers pay much less, on a sliding scale, than bigger producers. In Canada, only the beer excise tax is scaled that way, by the size of the operation, but the average tax here is still much higher than it is in the United States. It is twice that, and the independent craft brewers of Canada would like to fix it. One issue is the federal definition of a craft brewery, which is a brewery that produces less than 75,000 hectolitres of beer per year. If a brewery makes more beer than that, it pays the full excise tax. However, there are different definitions. In Alberta and Saskatchewan, the definition of a craft brewery is one that produces less than 400,000 hectolitres, and in the United States the definition means seven million hectolitres. That is what they consider a craft brewery south of the border. It is clear that it would be helpful for Canadian breweries if these definitions and regulations were synchronized as much as possible so that competition is as fair as possible. Craft brewers have put forward a reasonable suggestion to the government that would do just that, and I urge the Minister of Finance to consider it seriously. The wine sector is in a special situation because most wineries in Canada never had to pay excise tax until last year, when Canada eliminated an exemption for wines made from Canadian grapes after a trade dispute with Australia. After strong lobbying from the wine industry, the federal government did step up with a support program to help wineries adapt to this new reality, but that support is set to disappear next year. The excise tax will continue after next year, of course, so it makes sense that a more long-term solution is needed. Craft distillers are the hardest hit in many ways. As I mentioned earlier when reading the letter from Maple Leaf Spirits, the excise tax on a one-litre bottle is $5.22, and when we add provincial taxes, that goes up to about nine dollars. This makes it very difficult for local producers such as Jorg and Anette Engel to compete with imports from other countries that are taxed at a fraction of that rate. We need a similar restructuring of the excise tax on spirits to level the playing field. These are all reasonable, common-sense recommendations, and I know from experience that the government will sometimes listen to such recommendations and make the right decisions. When the beer industry came to me last year and pointed out that de-alcoholized beer was being charged an alcohol excise tax, I put forward a private member's bill that would remove that tax. To its credit, the government included that provision in last year's budget, so it can be done. The House of Commons finance committee has recommended that the government freeze the excise tax rate at 2022 levels for at least the next two years, and I hope the government takes up that advice for the budget coming next Tuesday. I also hope it will listen to Canadian producers of beer, wine and spirits and restructure the excise tax to make it fairer for small producers so that this sector can continue to make fine products and make a very important contribution to our local economies.

1418 words

Context: House Hansard - 171 - Mar/22/23

Mr. Daniel Blaikie (Elmwood—Transcona, NDP)

Mar/22/23 9:27:33 p.m.
Watch

Madam Speaker, I want to tell the story of Marcel Rheault and Mireille Morin, the owners of the Rheault Distillery in Hearst, Ontario, which produces Loon Vodka. They cannot raise their price any more to be competitive. A 6% tax hike is something that is really going to hurt them and their product, which has won many awards for its quality. It is for people like Marcel and Mireille that we need to adopt this motion this evening. I am very pleased to rise and talk a little bit about the situation in Winnipeg. We have a lot of local brewers and distillers in the province of Manitoba. I think especially of Crown Royal, but there are many beer makers in Manitoba, such as Half Pints, Barn Hammer, Torque and Little Brown Jug. I could go on; there are a number. Manitobans are pleased to support their local brewers when they reach into the fridge for a beer at the end of a long week, if that is their choice. We want them to be able to continue to do that and continue to support local economies when they do. However, the fact of the matter is that many producers, particularly smaller producers, are in a tight spot when it comes to an increase in the excise tax. The excise tax is not based on a percentage of their revenue or of their profit; it is a certain amount they have to pay for every unit sold, so when it goes up, it really has an impact on their business model. Also, because that increase in the rate of tax is tied to inflation, we are seeing that be a particularly high increase this year. I think it was always a problem having a tax tied to inflation, a tax levied at an absolute rate, which is raised at the rate of inflation. It is something that was raised in 2017-2018 when the Liberals first brought this in. People asked, “What if we have a period of extraordinary inflation?” They said, “Well, that is not likely to happen. Inflation has been very consistent.” Of course, we know that major events can change the course of an economy, and Canada, along with many other parts of the world, has certainly been experiencing that. We have had a major event with the pandemic and there are major events happening as a result of climate change. Those are having an impact on the economy. As we see inflation go up, we should not see the government exacerbating the problem of inflation by having an automatic increase in the tax, which is not to say that no taxes can increase, but it is appropriate to have a debate and a vote in Parliament in order to have that happen. What we are seeing now is the fruit of a decision to take Parliament out of the equation and have those taxes increase automatically at the rate of inflation instead of increasing them deliberately by a choice of Parliament in the face of difficult economic circumstances. As my colleague for South Okanagan—West Kootenay pointed out earlier, quite rightly, there are other issues with the excise tax. New Democrats support the idea of a more gradual ramping up of the excise tax in order to help smaller brewers and smaller producers be more competitive when they are trying to carve out a space for themselves in what is a very competitive market with a lot of established, large players. That is not exactly what the motion calls for tonight, but I think that is part of the larger conversation we might be able to have more readily in this place if the excise tax were not already on an automatic escalator. It would mean that government would have to come back to this place every year if it wanted to see the excise tax go up, and that would create opportunities for parliamentarians, like New Democrats, who are interested in a fairer excise tax structure for smaller producers, to raise those issues at that time. Today, then, we are doing this in the context of an opposition day motion, because otherwise there is no natural opportunity to be able to discuss this kind of thing. I do think there is a real argument to be made about the particular economic circumstances we find ourselves in for Canadians who enjoy the odd beer and who are already facing increasing costs on groceries, rent and everything else. They do not need an added increase in the excise tax on their beer. There is an argument to be made for small businesses that are going to be distressed by having to pay these additional costs and worrying about whether they can raise their prices in order to pass that on to the consumer without just getting shut out of the market. I also think there is a more general and principled argument about the role of Parliament in approving taxation, where we can have great debates in this place about what the appropriate rate of taxation is on various things, and I am sure that we can find at least as much disagreement as we find agreement on that. I think it is important that this debate come to this place and that increases in taxes are approved. I would say this is just the other side of the coin of another measure that I do not personally support, which is indexing income tax brackets to inflation, too. I think that governments and legislatures, particularly, have a responsibility to evaluate the circumstances and make decisions, in a particular time, about what is appropriate. If that is a change in tax brackets, that is something that should be deliberately debated and about which a very intentional decision should be made. When it comes to something like the excise tax, likewise, that is something that should be debated and there should be an intentional decision about it. I think this mechanism of an automatic escalator is problematic because it removes people's democratically elected legislators from the equation when we are having important debates about what an appropriate rate of taxation is. I am a member of the finance committee, and I was certainly very happy to see in the finance committee's pre-budget consultation report a recommendation to freeze this planned excise tax increase, so that lets us know that it is not just coming from one party. It takes a majority voice on a committee in order to issue a recommendation, and I think the government should take very seriously the fact that coming out of one of the most senior committees of the House of Commons was a recommendation not to proceed with this tax hike. I think they need to look at the extent to which the excise tax will be increased because of the extraordinary period of inflation we have been living through over the last 12 months. This was not the kind of usual inflation that was normal in the Canadian economy prior to the pandemic. I do not believe this is what the government of the day foresaw. It is certainly not what Canadians foresaw when this automatic escalator was put in, and I think it is reasonable to recognize that the situation calls for a different course of action. That is why I am pleased to rise in support of the motion, alongside my other New Democratic colleagues.

1255 words