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Federal taxes hurting B.C. wineries and craft brewers

Published

9 months ago

5 minute read

From the Canadian Taxpayers Federation

By Carson Binda

Trudeau has a habit of saying his government is working to make life more affordable, but tax hikes do just the opposite.

Federal tax hikes are hitting a crucial industry in British Columbia at the worst possible time.

The alcohol industry across B.C. has had a tough couple months. Between forest fires, droughts and cold snaps, wine-growers and craft brewers will have a harder time turning a profit this year. And Prime Minister Justin Trudeau is about to make things even worse.

In April, Trudeau is hiking federal taxes on beer, wine and spirits by almost five per cent. Taxes already account for about half the price you pay for alcoholic beverages. That means every time you buy a bottle of wine or a six-pack of your favourite craft beer, you’re also buying one for the taxman.

To add insult to injury, the tax hike is automatic, meaning our elected MPs won’t vote on the increased taxes on wine and other alcoholic beverages.

Back in 2017, the Trudeau government introduced a tax escalator on alcoholic beverages. The escalator means the taxes on beer, wine, ciders and spirits goes up automatically every year, without a vote in Parliament.

Regardless of your views on alcohol, it’s wrong for the government to hike taxes without letting the democratic process weigh in.

Trudeau shouldn’t be jacking up taxes on a struggling industry, especially not without letting our elected representatives voice their concerns by actually voting on the hike.

Wine growing is an important industry in B.C., with more than 12,000 people across every region of B.C. employed. It creates more than $3.75 billion for the provincial economy. Almost 1.2 million tourists visit B.C. wineries every year. There are 341 separate wineries in our province alone, with hundreds more wineries across the country.

While taxes on B.C. VQA wines are less than the taxes on non-VQA wines, VQA wines only make up around 19 per cent of sales. Local non-VQA wines in B.C. are the most frequent type of wine sold in the province.

Craft beer is also a big driver of the local economy. There are more than 200 craft breweries in B.C. alone, which made almost $230 million in revenue in 2020. Around 4,500 people are employed by craft breweries in B.C. And more than 95 per cent of wineries, breweries, cideries and distillers in B.C. are small businesses.

A majority of the 1,100 craft breweries in Canada are in rural areas where they are important employers. It’s wrong for the small businesses in rural communities to be picking up the bill for big-spending politicians in Ottawa.

Small businesses selling alcoholic beverages are also going to be paying the tab for Trudeau’s tax binge. Think about all the pubs, bars and restaurants that make ends meet by selling beverages to thirsty British Columbians.

Instead of hitting the gems of our provincial economy with automatic tax hikes, we should be supporting those small mom-and-pop brewers and pubs to ensure they can keep employing thousands of British Columbians and pumping billions into our economy.

Credit where credit is due: Some federal politicians like MP Tracy Gray in Kelowna have been vocal in their opposition to the escalator tax. But that’s falling on deaf ears in the prime minister’s office.

Trudeau has a habit of saying his government is working to make life more affordable, but tax hikes do just the opposite.

If Trudeau really wanted to help the little guy get ahead, he wouldn’t be hiking taxes on small businesses and families.

Carson Binda is the B.C. Director for the Canadian Taxpayers Federation

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“In Malaysia, our research has indicated that harm reduction needs of GBMSM [gay, bisexual, and other men who have sex with men] engaged in chemsex are not being adequately met,” Shrestha told UCONN Today. “Utilizing smartphone apps and other mHealth tools presents a promising and cost-effective approach to expand access to these services.”

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Broken ‘equalization’ program bad for all provinces

Published on November 21, 2024

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Back in the summer at a meeting in Halifax, several provincial premiers discussed a lawsuit meant to force the federal government to make changes to Canada’s equalization program. The suit—filed by Newfoundland and Labrador and backed by British Columbia, Saskatchewan and Alberta—effectively argues that the current formula isn’t fair. But while the question of “fairness” can be subjective, its clear the equalization program is broken.

In theory, the program equalizes the ability of provinces to deliver reasonably comparable services at a reasonably comparable level of taxation. Any province’s ability to pay is based on its “fiscal capacity”—that is, its ability to raise revenue.

This year, equalization payments will total a projected $25.3 billion with all provinces except B.C., Alberta and Saskatchewan to receive some money. Whether due to higher incomes, higher employment or other factors, these three provinces have a greater ability to collect government revenue so they will not receive equalization.

However, contrary to the intent of the program, as recently as 2021, equalization program costs increased despite a decline in the fiscal capacity of oil-producing provinces such as Alberta, Saskatchewan, and Newfoundland and Labrador. In other words, the fiscal capacity gap among provinces was shrinking, yet recipient provinces still received a larger equalization payment.

Why? Because a “fixed-growth rule,” introduced by the Harper government in 2009, ensures that payments grow roughly in line with the economy—even if the gap between richer and poorer provinces shrinks. The result? Total equalization payments (before adjusting for inflation) increased by 19 per cent between 2015/16 and 2020/21 despite the gap in fiscal capacities between provinces shrinking during this time.

Moreover, the structure of the equalization program is also causing problems, even for recipient provinces, because it generates strong disincentives to natural resource development and the resulting economic growth because the program “claws back” equalization dollars when provinces raise revenue from natural resource development. Despite some changes to reduce this problem, one study estimated that a recipient province wishing to increase its natural resource revenues by a modest 10 per cent could face up to a 97 per cent claw back in equalization payments.

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Finally, the current program design also encourages recipient provinces to maintain high personal and business income tax rates. While higher tax rates can reduce the incentive to work, invest and be productive, they also raise the national standard average tax rate, which is used in the equalization allocation formula. Therefore, provinces are incentivized to maintain high and economically damaging tax rates to maximize equalization payments.

Unless premiers push for reforms that will improve economic incentives and contain program costs, all provinces—recipient and non-recipient—will suffer the consequences.

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