Canada: Excise tax break puts domestic craft brewers on a sounder financial footing

A regulation coming into effect on July 01, Canada Day, that cuts excise taxes on small breweries is being hailed locally, Guelph Mercury posted June 26.

The graduate excise tax quietly introduced in the last federal budget and coming into effect July 1 is a godsend, Guelph's Wellington and F & M breweries said June 25.

"We've been lobbying for this for 12 years," Wellington Brewery president Mike Stirrup said, noting Canada's microbreweries will finally be able to compete fairly against foreign competitors who already have graduated - or sliding scale - excise taxes.

"It basically levels out the playing field," Stirrup said.

Rob Creighton, head of F & M Brewery's sales and marketing, said it also puts these craft brewers on a sounder financial footing, allowing them to keep more money to reinvest in operations.

Stirrup said the tax break will save Wellington Brewery an estimated $150,000 to $175,000 a year, which it can reinvest in new production equipment, marketing and distribution (all figures in CAD). It may even add to its 20 full-and part-time staff. Creighton said the savings at F & M, which employs five, is about $50,000 a year to pour back into business ventures, like becoming a sponsor of Guelph's upcoming Hillside Festival this year for the first time.

"It certainly plays to our drinkers - and it's a high-profile event," Creighton said of the Hillside promotion.

The excise tax reduction is "a very, very substantial break for us and, to be frank, we're thrilled," Creighton said. "It's huge for us."

The degree of the tax break varies by the amount of annual production.

Under the new regulations, a brewery like F & M, which makes 1,200 hectolitres a year, gets a 90 per cent tax reduction, paying $3.122 per hectolitre.

The larger Wellington Brewery, making 12,000 hectolitre, is in a category paying almost $12.45 per hectolitre, a 60 per cent cut.

A hectolitre is equivalent to 12 cases of 24 bottles of beer.

Prior to the budget change, all breweries large and small paid the same excise tax of about $31 per hectolitre.

In Canada, microbrewers are considered those that brew less than 300,000 hectolitres of beer annually, distinguishing them from the countries' largest breweries -- Labatt's, Molson Coors and Guelph's Sleeman Breweries.

A beer bash recently on Parliament Hill was originally a chance for microbreweries to lobby against high excise taxes, but it turned into a celebration of sorts.

Ottawa-area Tory MP Scott Reid and the Ontario Craft Brewers industry group, representing 30 brewers, held their third annual beer tasting June 13, though it had been planned before the May federal budget.

Reid's legislative assistant, Stephen McDonald, said the MP and the industry association wanted to promote small breweries and raise the tax fairness issue at the beer-tasting.

"We had no idea it was in the budget," he observed. "That actually worked out quite coincidentally."

Both the United States and European Union countries have such progressive tax regimens, McDonald said. "With the budget, we've kind of adopted a system like that."

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