The current federal election campaign in Canada is a good time to review the nation’s antiquated and jobs killing alcohol excise duty structure.
Federal excise duties on Spirits sold in Canada today are equal to $3.51 per 750 ml bottle (@40% alcohol content), well above levels allowing Canadian success in a globally competitive international market. Moreover, these high Spirits excise duties are exponentially magnified by a series of further “ad valorem”, or price-based sales taxes and provincial mark-ups across the supply chain meaning the true impact is closer to $6.00 at retail.
For its part, the United Kingdom reduced its own excise duties on Scotch whiskies and other spirits by the equivalent of nearly $0.35 per 750 ml bottle earlier this year. In the words of the British Chancellor of the Exchequer, George Osborne, the duty cut on Scotch whisky and other spirits is “to back one of the UK’s biggest exports.”
The equivalent spirits excise duty in the USA is $2.14, 40% lower than Canada’s. Moreover, there is a bipartisan Bill (H.R. 2510, “Distillery Innovation and Excise Tax Reform Act of 2015”) before the U.S. Congress right now to further reduce the American spirits excise duty rate.
The opening of new export markets — thanks to Canada’s aggressive free trade strategy — is a huge opportunity for Canadian Spirits manufacturers. But, those opportunities require significant industry investments to exploit, investments that must be funded from one’s home market.
Canadian Whisky manufacturers are ideally suited to win in many of these foreign markets due to the authenticity, heritage, and quality reputation associated with Canada. Yet, Canadian exporters have far fewer financial resources than those available to American, Irish and Scottish whisky makers, producers with whom Canadian distillers directly compete.
Every bottle of Canadian Whisky sold overseas is mashed, fermented and distilled from cereal grains grown in Canada, providing jobs and employment not only in our manufacturing plants but on farms across the country and in thousands of small and medium size businesses providing key goods and services.
A more competitive Spirits excise duty structure is one reform that all political parties should be able to support. As American Whiskey Advocate magazine’s Managing Editor Lew Bryson put it not long ago, “Until the taxes become more reasonable, it doesn’t seem likely that Canadian whisky will be fully joining other whiskies in its rightful place on the stage…and that’s a tragedy.”
It’s not too late, let’s support Canadian farms, farmers and our great Spirits making and exporting tradition!
September 2, 2015