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30 June, 2006



Brewing news Canada: Conservatives exempt brewers and vintners from $28 million in excise duties

Finance Minister Jim Flaherty says the Conservative government is giving Canadian brewers and vintners even more tax relief than originally promised, The Canadian Press informed June 29.

This year’s budget proposed eliminating the federal excise duty for producers of large quantities of beer and wine made with 100 per cent Canadian product.

But Flaherty says after listening to industry delegations, he has decided to expand the tax breaks to all Canadian wine and beer producers.

He says brewers will get $18 million a year in tax relief, while the tax breaks for the vintners will grow to $10 million annually.

Flaherty says the change will benefit vintners in British Columbia’s Okanagan region, the Annapolis Valley in Nova Scotia and Quebec’s eastern townships.

"The Canadian wine and beer industries make a significant contribution to our economy through job creation, tourism and sales of high quality products," Flaherty said. "After consulting with both industries, we felt it was necessary to offer more tax relief than stated in our government's first budget."

The tax on regular-strength beer was to be increased by 3.2 cents a litre to 31.22 cents, a hike that would have added 26 cents to the price of a 24. Small operators producing no more than 300,000 hectolitres per year would get a tax break that decreased as their production rose. By taking away the threshold, the government estimates it is putting about $18 million back into the industry.

The budget hiked the tax on wine by 10.8 cents a litre, taking it to 62 cents. Small producers were to get an exemption on the first 500,000 litres made from 100 per cent Canadian-grown grapes. Extending that relief to the entire industry will cut taxes on wine by about 46.5 cents per bottle, giving the industry about $10 million.

"You're going to see significant capital investment in Ontario wineries because of this measure," said Norm Beal, president of Peninsula Estates and chairman of the Wine Council of Ontario. "This is relief that has already been given in every other wine-producing region of the world."

Beal said, for his small operation, the changes will mean about $5 a case in tax cuts.

Similar tax relief in New York State, he noted, helped six new wineries start in Lewiston where there were none just five years ago.

"The Niagara Peninsula doesn't stop at the border," he said.

Teresa Cascioli, chair of Lakeport brewery, said the tax changes won't affect prices at the Beer Store. But, she adds, it's a critical development for Canadian brewers who faced an increase in production taxes that was greater than the savings from the GST cut.

For a low-price operator like Cascioli's Hamilton-based brewery, that was money right off a bottom line already squeezed by razor-thin margins.

"This is a method for more evenly balancing the increase in the excise tax and the cut in the GST and I applaud the government for having done this," she says.

"The original policy would have increased our costs, but now things are pretty much evened out."

Canada's booze industry directly employs about 15,000 people. In 2003, they produced nearly $1.4 billion worth of liquor, almost $4.2 billion in beer and about $2 billion worth of wine.

The alcohol changes take effect July 01 along with the GST reduction





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