OTTAWA, Oct. 23, 2012 /CNW/ - In order to help stimulate growth within the Canadian Spirits Industry, Conservative James Bezan, MP for Selkirk-Interlake, today introduced a private member's bill to reduce federal excise duties on spirits by $1.00 per litre of absolute alcohol (laa).
"Our Government has in recent years reduced the excise burden on both beer and wine, and it's time we now did the same for the country's most iconic products, "Canadian Whisky" and "Canadian Rye Whisky", said Bezan.
The Bill would amend the Excise Act, 2001 by reducing the federal excise duty on distilled spirits from $11.696 to $10.696 per litre of Absolute Ethyl Alcohol (LAA).
"The benefits of a modest reduction in excise duties on spirits would be tremendous, including spurring new investment in plants and infrastructure, help fund the opening of new export markets, and create new demand for Canadian cereal grains such as barley, corn, wheat and rye", explained Bezan. "I ask the Government of Canada to bring this bill into force as soon as we have balanced our budget."
"Canadian Spirits producers are very appreciative of the efforts of Mr. Bezan to reduce the very high tax burden imposed on them in Canada", added Jan Westcott, President & CEO of Spirits Canada. "There are really tremendous opportunities for growth for the Industry. All we really need is a more competitive tax structure to unleash those forces."
If enacted, the effective duty rate on spirits would be reduced from 20 cents per standard drink1 to 18 cents, versus comparable duty rates of 9 cents for wine and 10½ cents for beer.
1 A standard drink is a serving of 17 ml of pure alcohol and is equivalent to a 12 ounce serving of 5% abv beer, a 5 ounce serving of 12% abv wine or a 1½ ounce serving of 40% abv spirits.
Canada Beverage Alcohol Excise Duties
Canada imposes federal excise duties on beverage alcohol products sold in Canada. The duty rates for spirits and wine are established under the Excise Act, 2001, while beer rates are set under the Excise Act.
Current duty rates vary by alcohol category with product categories defined by various characteristics including its agricultural feedstock, manufacturing method, and alcohol content.
|Product Category||General Duty Rate|
|Beer >1.2% abv, ≤2.5% abv||$0.1561 per litre|
|Beer > 2.5% abv||$0.3122 per litre|
|Wine >1.2% abv, ≤7% abv||$0.2950 per litre|
|Wine > 7% abv||$0.6200 per litre|
|Spirits ≤7% abv||$0.2950 per litre|
|Spirits > 7% abv||$11.696 per litre of absolute alcohol|
Note: no wine duty imposed on wineries with sales less than $50,000/year.
A number of changes to Canada's excise duty structure were introduced in the 2006 federal budget. These measures included rate increases for all categories to recover estimated lost federal Treasury revenue on beverage alcohol sales as a result of the reduction in the GST rate from 7% to 6%. Additional changes included,
|1)||a sliding scale reduction in excise duty rates on the 1st 7,500,000 litres of beer produced and packaged in Canada each year. For beer products with an alcohol content greater than 2.5% abv, duty rates are as follows:|
|Annual Production Increments (Litres)||Beer Excise Duty Rate Per Litre|
|From 0 to 200,000||$0.03122|
|Next 200,001 to 500,000||$0.06244|
|Next 500,001 to 1,500,000||$0.12488|
|Next 1,500,001 to 5,000,000||$0.21854|
|Next 5,000,001 to 7,500,000||$0.26537|
|On volume greater than 7,500,000||$0.3122|
Note: similar rate reductions available on beer with an alcohol content greater than 1.2%, but not more than 2.5% of absolute ethyl alcohol.
|2)||an exemption from all excise duties on wines produced in Canada and composed wholly of agricultural or plant products (e.g. grapes, berries, other fruits, honey, dandelions, etc) grown in Canada.|
Both the excise duty reduction for beer produced and packaged in Canada and the duty exemption for wines produced from 100% Canadian-grown fruits or grapes were introduced to "stimulate further growth within the Canadian wine and beer industries."2
The definition for "beer" was amended, effective February 2008, imposing a maximum alcohol content of 11.9% abv on beer products eligible to be treated as beer for excise duty purposes so as to combat the introduction of "imitation spirits".
Federal Treasury Revenue Effects
While spirits represented 24.9% of beverage alcohol sales in Canada in 2011, a marginal decrease from 25.0% in 2006, spirits today represent over 44% of federal alcohol excise duties, an increase from 38.1% in 2006.
|Category||Duty Paid (2006)||Share (2006)||Duty Paid (2011)||Share (2011)|
Source: Public Accounts of Canada
Units of Measure
General beer and wine federal excise duties are applied on a per litre basis, while excise duties on spirits with an alcohol content above 7% are applied on a per litre of absolute alcohol basis making direct comparisons somewhat difficult. The following chart summarizes federal excise duties across alcohol categories on both a litre of absolute alcohol as well as on a standard drinks3 basis.
|Category||Duty Rate||Rate Per LAA||Rate Per Std. Drink|
Benefits of Spirits Excise Duty Reduction
It is expected that a reduction in federal excise duties on spirits will help stimulate growth within the spirits industry by improving gross supplier margins. Improved gross supplier margins, margins necessary to fund all production, marketing and sales costs, are necessary in order to:
|1)||upgrade and improve efficiencies in industry manufacturing, bottling and warehousing facilities;|
|2)||identify, develop and grow new export markets;|
|3)||encourage new product and packaging innovation;|
|4)||support small and medium sized businesses providing essential support services to local spirits manufacturers, including Canadian barley, corn, rye and wheat farmers;|
|5)||improve Canadian spirits competitiveness vis-à-vis foreign competitors; and|
|6)||support Canada's iconic spirits beverages including Canadian Whisky and Canadian Rye Whisky.|
2 Canada's New Government is Further Reducing the Tax Burden for Canadian Wineries and Breweries, Beamsville, June 28, 2006
3 A standard drink contains 17 ml of pure alcohol, whether served as a 12 ounce bottle of 5% abv beer, a 5 ounce glass of 12% abv wine or a spirits cocktail containing 1½ ounces at 40% abv.
SOURCE: Spirits Canada
For further information:
Mr. Jan Westcott
President & CEO