Conflict between restaurateurs, consumer advocates and winery owners over alcohol taxation has gone public during the B.C. government’s liquor policy review.
The clash centres on whether wine and spirits should continue to be taxed as a percentage of the retail price.
An increasingly popular alternative is to apply a flat tax to both based on their alcohol percentage – a system currently in place for beer.
All agree that a flat tax would raise the price of cheap wines and lower the price of higher-end wines. Sharp differences emerge on whether that would be good for B.C.’s wine, hospitality and tourism sectors.
“Moving to a flat tax would stifle the sale of wine,” Vintage Consulting Group principal Harry McWatters told Business in Vancouver.
McWatters is a 45-year B.C. wine industry veteran who founded Sumac Ridge in 1980. He believes that in order for a flat tax to be revenue-neutral to government, the rate would have to be so high for low-end wines that it would drive consumers to either buy different alcoholic drinks or to make wine themselves at a U-vin.
Neither would be good for B.C. winemakers, he said, before warning of job losses.
McWatters pointed out that much of the cheap wine sold in B.C. is foreign juice cellared and bottled in B.C. by companies such as Mark Anthony Group and Constellation Brands Inc. (NYSE:STZ).
“We should be careful before we kick them in the shins and say we don’t want them doing it,” McWatters said. “Players like Constellation would radically downsize if they stay here at all.”
Both Constellation and the BC Wine Institute (BCWI) want the province to retain the current system, but not all winery owners are onside.
Tinhorn Creek Vineyards co-owner Sandra Oldfield and Bench 1775 owner James Stewart believe a flat tax would help BC Vintners Quality Alliance (BCVQA) wines because wines priced above $15.90 would have less tax under a flat-tax system and most BCVQA wines are in that category.
The average purchase price for the equivalent of a bottle of domestic wine in B.C. was $9.64 in the year that ended June 30, according to BC Liquor Distribution Branch statistics.
For imported wine, it was $12.78.
“The devil is in the details,” Oldfield said.
“Alberta has had a flat tax for two decades, and it has worked well for us there.”
Restaurant owners back the flat tax because most serve mid- to high-end products, Canadian Restaurant and Foodservices Association (CFRA) vice-president Mark von Schellwitz told BIV.
“The current system creates a sticker shock for those coming to B.C. from neighbouring jurisdictions. That creates a smuggling problem.”
Von Schellwitz added that a flat tax also makes it easier for government bean-counters to meet budget targets.
Instead of estimating how much wine at various price-points will sell, the government could make one projection for total wine sales.
Simple math would then tell it what rate the flat tax would need to be to meet the revenue projection, von Schellwitz argued.
The public has until October 31 to submit ideas for how to reform what Premier Christy Clark has called “B.C.’s antiquated liquor laws.”
Parliamentary secretary for liquor policy reform, John Yap, will then summarize feedback in a report to Justice Minister Suzanne Anton by November 25 with his recommendations. •
