The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-232, under private members' business.
The question is on the motion.
Ben Lobb Conservative
Introduced as a private member’s bill. (These don’t often become law.)
This is from the published bill. The Library of Parliament often publishes better independent summaries.
This enactment amends the Excise Act, 2001 to provide that, in the case of certain spirits, different rates of duty are imposed based on the quantity produced.
Excise Act, 2001Private Members' Business
September 21st, 2016 / 6:35 p.m.
The Speaker Liberal Geoff Regan
The House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-232, under private members' business.
The question is on the motion.
The House resumed from September 19 consideration of the motion that Bill C-232, An Act to amend the Excise Act, 2001 (spirits), be read the second time and referred to a committee.
Excise Act, 2001Private Members' Business
September 19th, 2016 / 11:40 a.m.
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Mr. Speaker, it is great to be back in the House for the fall session, and indeed an honour to speak to Bill C-232, an act to amend the Excise Act, 2001 (spirits). I want to thank my colleague, the member for Huron—Bruce, for bringing the bill forward. It is something that he cares deeply about for a number of reasons, and something that I have worked on with him in the past. In the last session, I tabled a private member's bill, Bill C-456, which was also an act to amend the Excise Tax to reduce the tax on ethyl alcohol by $1 per litre. However, the member has brought forward a far more focused bill, one we should all get behind because of what it could do for the spirits industry.
There are only five types of whisky in the world. One of the most popular is our iconic Canadian rye whisky. I am proud to say that the best rye whisky in the world is produced right in my riding, in Gimli, at the Diageo plant. A lot of people do not realize this, but the Diageo plant in Gimli is the largest whisky distillery in Canada and the fifth largest distillery in the world producing whisky.
A lot of us are familiar with Northern Harvest Rye, which is produced at the Crown Royal plant in Gimli. It is now the world champion whisky, having won in Scotland back in January against all the scotches, the bourbons, and Irish whiskys. It is a very popular blended whisky and one that all of us should be proud of. It is unfortunate that the Speaker's whisky is not a Canadian whisky, and it is definitely not Northern Harvest Rye. I would hope that in the future the whisky featured at the House of Commons could be a Canadian rye whisky.
I want to correct the record on something that the member for Winnipeg North said about making sure that the tax treatment is fair and does not impact imports and exports. We know for a fact that this is an equitable tax that would apply to importers and exporters. When we changed the taxation on beers and wines made by local vintners or craft breweries, these producers never experienced any trade retaliation whatsoever. Therefore, the member for Winnipeg North should get up and correct the record, rather than trying to propagate a dissenting opinion based upon erroneous assessments.
The Diageo plant in Gimli, where all the Crown Royal in the world is produced, has some challenges ahead of it. One of those is trying to deal with a rail bridge over which Diageo brings in its grains and exports out its distilled whisky. It is a short line rail. Unfortunately, there needs to be investment made in it to bring it up to safe standards. The short line is looking at some options on how it can do that to continue to service Diageo. Aside from that, Diageo would love to expand the plant because Crown Royal is the number one export whisky from Canada, as well as the number one consumed whisky within Canada. It would love to expand production, but of course this requires long-term investments. One does not just roll out a batch of whisky and put it out into the market. It has to be aged and blended, and Diageo has to make sure it is putting together a high-quality product.
Diageo would love to see that expansion take place, but there is this unfair taxation within Canada today through the excise tax on spirits. This unfairness is the result of our decision a number of years ago, under our previous Conservative government, to give a greater break to wine and beer, so that taxation on undistilled alcohol from those industries is lower than on spirits. We need to close that disparity to see major investments in distilleries across the country and to allow them to serve the market out there.
If we look at the experience we had, we saw a major increase in the number of new entrepreneurial businesses, small businesses, creating local employment and buying locally produced agricultural products, after we changed the excise tax on the craft breweries and the small vintners and the wines they produce.
Bill C-232 would decrease the current excise tax of $11.696 per litre of absolute ethyl alcohol. It would decrease the excise tax on the first 100,000 litres produced down to $6 a litre. That would be a huge saving to those small craft distilleries, allowing more opportunity for Canadian businesses to produce a variety of spirits, not just Canadian rye whisky but others as well, and really have that local context.
If we look at how that went in the brewery and vintner industries, we saw an explosion in the number of of these small businesses, particularly small craft breweries. We also saw an opportunity for us as consumers to do more connoisseuring, I guess we could say, of the different varieties that are out there. There are different blends, there are different flavours, there are different tastes, which we had not been exposed to for a long time in Canada. It provided us with a whole new experience in trying these different fine wines produced locally, these different great craft beers. It would be fantastic if we could have that same explosion happen in the distillery industry.
The one thing we continue to talk about is how this tax reduction on distilleries would create jobs. A case in point is the craft brewery industry itself. Last week, when I was in Halifax, I had an opportunity to go down to Pier 21 and visit Garrison Brewing Company, a small craft brewery that started after the changes happened in the excise tax for the beer industry. It was able to take an idea and grow it into a prosperous business. Nova Scotia alone went from having just a couple of craft breweries to now having over 45. The interesting fact is that if we take our mainstream breweries and the number of jobs they create and compare those with craft breweries, for every job in the mainstream breweries, a craft brewery has five. It is a 5:1 ratio. We are talking about employment opportunities. This is a time in our economy when we need every possible tool the government can give to entrepreneurs and business to create new jobs. We are going to create jobs, not only in building these distilleries but also in the operation of these distilleries, because they tend to be less mechanized and more labour intensive, giving more attention to the details of their distillery practices themselves, as we see in craft breweries and in small vintners.
It is important that we create this opportunity in a lot of our local communities, not just in the major centres that we usually see.
Gimli, of course, is an exception. The reason that Diageo, and before that Seagram's, set up in Gimli was for the water. The water and locally produced grains produce Crown Royal's unique taste.
I talked about the opportunities from the employment side. It also creates a huge opportunity for agricultural producers, as distilleries are a major buyer of Canadian grains. I see it in my riding of Selkirk—Interlake—Eastman, where local producers are growing rye, corn, barley, and other inputs on contract for Diageo to create that unique taste and flavour of Crown Royal. The same type of opportunities will be presented to small distilleries right across this country as they feed into the growing consumer market for unique and new products in the spirits industry.
I encourage all my colleagues in the House to support the bill. Let us get it to committee for study and allow the committee to bring in experts to document how this reduction in the excise tax would probably increase the level of tax revenue coming back to the government, through increased employment and an increased number of businesses, which would benefit from the changes in the Excise Tax Act.
Again, I thank my colleague, the member for the Huron—Bruce, for bringing forward such an important bill today.
Excise Act, 2001Private Members' Business
September 19th, 2016 / 11:20 a.m.
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Mr. Speaker, it is indeed an honour and a pleasure to speak to the bill brought forward by my colleague from Huron—Bruce. It was introduced before Parliament broke for the summer and, as has been mentioned, it gave us an opportunity to have discussions with distillers, which I did this summer out in Nova Scotia, along with the folks in my own area in Ontario. I also spoke with the agriculture community, which not only plays a significant role in terms of the success of this industry but also in terms of building the industry and making a quality product. I will touch on that a little later as I move along.
Bill C-232 is about changing the excise tax. It takes it away from the percentage of absolute alcohol and moves it to the volume of alcohol that is being produced. That may sound a little harsh, but the reality is that for alcohol over 7%, the duty was $11.69 per litre. For under 7%, it was $0.295 per litre of absolute alcohol. The idea now is to move that away from that percentage point to a volume, which is quick and simple. In fact, the distillers we have in Canada are micro, small and medium-sized. Therefore, it will move it to a very simplified and fair regime of $6 for the first 100,000 litres produced and $11 for over 100,000 litres.
You have to remember that when we speak of volume, it is equal for all types of alcoholic beverages; that is, 1.5 ounces of spirits containing 40% alcohol, five ounces of wine containing 12% alcohol, and 12 ounces of beer containing 5% alcohol. That is referred to as a standard glass. Therefore, it makes it comparable across the board for those who want to look at the equivalency of different drinks. The excise tax on beer and wine has been lower.
I listened to my colleague from Winnipeg ask why our government did not do this before when we were in government. We in fact took action but it was a process. However, members have to remember that although the Liberals proposed to deal with it in their budget, they chose not to at the time. I am glad to hear that they now see this as a positive move because quite honestly it is. It is about small and medium-sized businesses. It is about the workers in our areas who work hard every day. This is of benefit to them. Why is that? We know that if we give an opportunity to any enterprise, the benefits will come. In this particular case, these small and medium-sized companies, mainly distillers, will take that money and reinvest it into innovation, marketing, and job creation.
In other jurisdictions where the excise tax has been lowered, it was not at a cost to the government. As Conservatives, we have always said that the reason we were able to produce surpluses in our budgets at year end was that when we lower taxes, we increase the revenue to the government.
Why is that? It is because we leave more money in the pockets of people. Businesses hire workers, workers pay taxes, and, as a result, the government and business both win by generating revenue in excess of what they did before the excise taxes, and any taxes, were lowered. That has become evident in the United States, where they have seen tremendous growth in the distillery industry. When the U.K. dropped the excise tax by 2%, it actually generated a revenue increase of some 96 million euros.
We believe that lowering taxes for businesses, particularly small and medium-sized businesses, for the most part, will generate more revenue than if we keep taxing them to death.
One of the other industries that makes this industry so important is obviously agriculture. In my riding of Lambton—Kent—Middlesex, agriculture is the largest industry. For the producers of the corn, wheat, barley, and some rye, that goes to the distillers, it is a significant part of income in the agriculture industry. In Ontario, the distillery industry is the fourth-largest purchaser of corn. Some 320,000 metric tonnes go into the production of spirits.
Why are the Canadian distillery industry and Canadian spirits so well regarded around the world? It is like anything else. Those on the manufacturing and production side who produce a quality product can be assured that in world markets, they will have a select and good market for their products. This is the case with our distilleries and the spirits produced in Canada. Our farmers produce the highest quality grains used to produce these spirits.
One of the great things Canada has is water. Canada is one of those blessed and very fortunate countries that can produce, with the technology we have, some of the best, purest, most pristine water in the world.
We are looking at a market that is shrinking for the spirit industry in Canada. The bill brought forward by my colleague for Huron—Bruce would give this industry an opportunity to start to gain back, through exports and domestic use, some of that market share by producing some of the greatest and finest spirits in the world. We want to make sure that we give these distillers, farmers, and all of those within the industry, the value-added industry, the benefits that, in the end, would benefit the Canadian people, through the government. As I mentioned, all of our distillers in Canada are small and medium sized.
In terms of marketing and promotion, we have world-class spirits. It is Canadian branded. We, and the Speaker of the House, have a designated choice of spirits for Canadians. The only recommendation I would make is that we use Canadian spirits for our designation as the Speaker's choice rather than something from another country.
Excise Act, 2001Private Members' Business
September 19th, 2016 / 11:10 a.m.
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Mr. Speaker, before I begin I just want to extend a warm welcome to you and to all my colleagues in the House. I hope we all had a restful and productive summer. It is great to see everyone again. Also, I want to wish a warm welcome to this year's new crop of pages. I know they are going to do a great job for us, and we are looking forward to working with them.
I would like to thank the member for Huron—Bruce for bringing forward the bill. I am proud to be speaking in support of it, because I believe that actions like this that help the small craft distillers across Canada, and one in particular in my riding, are going to be very beneficial.
Bill C-232 amends section 122 of the Excise Act, 2001. Its main purpose is to reduce the duty on spirits that are produced in Canada. That is an important thing to underline, because we have heard a lot from the opposite benches about how this is all about trade, as well as some misdirections in the debate. This bill is primarily about helping small craft distilleries, ones that do not really have a market outside of Canada. In a very competitive market, these distilleries need some help from the federal government.
The excise tax, as it is currently written, establishes a duty rate for the absolute ethyl alcohol contained in spirits. Its current rate is $11.69. Bill C-232 is going to see the first 100,000 litres of absolute ethyl alcohol reduced to a duty of $6 per litre, and any production over that will be reduced by a small amount to $11 per litre.
This is a good way to go. I have reviewed the debates from the first hour on the bill, and I just listened to the member for Winnipeg North. Frankly speaking, I cannot really understand why the Liberals seem to be going the way they are with the bill. I have listened to them reasoning the fact that they brought in the Canada child benefit, that the middle income tax bracket has been reduced, and that it might be in conflict with WTO rules and such.
However, hoping that Canadians are going to be spending their child benefits and tax breaks on Canadian spirits is hardly the way to give our hard-working small batch distillers the support they need to thrive. I know that as a father of young kids, with regard to the extra money I get for my children, my immediate thought is not that I am going to go to a liquor store and spend it on a bottle of gin.
There is also the fact that the Liberals have a little bit of a mixed history in this 42nd Parliament about supporting small businesses. They came to the House with a promise to reduce the rate to 9%, and then they broke that promise. I would have thought that a measure like this would be something that they would latch onto, to show small businesses that they did break one promise but they are willing to listen to industry experts and introduce a helping hand.
My party acknowledges the large contribution that small and medium-sized businesses provide to job creation in Canada. In Cowichan—Malahat—Langford, we have some fantastic entrepreneurs. These people put in very long hours. They often pay themselves a very small salary as they are giving their all to their businesses.
With craft distillers, it really is an art and a science all in one. They put a ton of effort into what they do to make an exceptional product. They have to make an exceptional product, because it is a very competitive industry and they do not have access to the amounts of capital that the big players in the market already have.
I do not agree with all aspects of the bill, but I certainly agree with the part that reduces the duty on the first 100,000 litres. To my friends across the way in the Liberal Party, instead of arguing about things that we have not had much discussion on, we should at least take the time to pass the bill at second reading and send it to committee so that we can call forward industry experts and regulatory experts to get an honest view of what the bill's impacts will be.
I do not believe in throwing the baby out with the bathwater. We should give the bill a chance at committee and see if it is going to do the things it says it will.
The government has stated that one of its goals is job creation and it has acknowledged that around 80% of the jobs in Canada come from small and medium-sized enterprises, so if we give our craft distillers a helping hand, reducing the duty on what they pay for their spirts, that is going to be a great thing.
I want to segue and highlight one distiller in my riding of Cowichan—Malahat—Langford. I have an award-winning distillery called Ampersand Distilling Company, which makes an award-winning gin and has moved on to vodka. Ampersand's market is Vancouver Island. It does not export beyond that. Some parts of the Lower Mainland are lucky enough to get its products, but it is not a big player. So far the duty is the same for all quantities of spirits produced. Ampersand does not come close to what big players like Seagram can produce. Even reaching 100,000 litres would be a dream come true for it.
That is just one example. I know that many MPs in the House are lucky to represent small craft distillers. If they are going to vote against the bill, I hope distillers in their ridings have very frank discussions with them about their reasons, because the bill does deserve a second look at committee.
Ampersand Distilling Company is a family-founded craft distillery. It is on a five-acre organic farm and is run by a father, son, wife, and a couple of employees. Giving them a hand-up would not only expand the beautiful product they make, but already the Cowichan Valley is getting a name for itself for producing amazing wines and if we can add craft spirits, that will be a big draw to tourism dollars.
We have been taking a narrow view. We have to look at the spin-off effects, the boost to tourism, and so on. It is already a difficult industry. It is a highly competitive market. Every litre of alcohol produced has to go through rigorous standards and be recorded and labelled. There have to be reports. Sometimes people from the Canada Revenue Agency pop in for snap inspections. It is a heavy burden. Some of these regulations are necessary, but we can ease the burden because larger businesses are able to bear regulatory burden much easier than small businesses. It is about giving these small businesses a leg-up.
Between 2004-12, statistics show the sale of goods manufactured by the Canadian distilling industry decreased by 2.4%. It went from $762.3 million to $744.2 million. During that time the import of spirits had an average annual growth rate of 6.6%, so our share of the domestic market has been shrinking. We have had a lot more imports coming in and our hard-working men and women in the craft distilling industry have to compete that much harder for a smaller slice of the market. As a result, imports represented a greater portion of the domestic market. They increased to 80% in 2012 compared to 74% in 2004.
The Association of Canadian Distillers did a lot of work on this issue and has recommended that the excise tax on the first 100,000 litres of absolute ethyl alcohol be reduced. That is something that I can agree with and I would love to hear more about if the bill is sent to committee.
For all the reasons I just mentioned, the bill needs to be sent to committee, but we can sometimes get lost in the rhetoric. The passage of the bill would certainly raise the spirits of our craft distillers and provide the industry with a great shot in the arm. I hope MPs will support the bill and raise a toast to the hard-working men and women and the great dedication they have to their craft.
The House resumed from April 22 consideration of the motion that Bill C-232, An Act to amend the Excise Act, 2001 (spirits), be read the second time and referred to a committee.
Excise Act, 2001Private Members' Business
April 22nd, 2016 / 2:15 p.m.
David Graham Liberal Laurentides—Labelle, QC
Mr. Speaker, I rise to speak to Bill C-232, an act to amend the Excise Act, 2001 (spirits).
This bill would amend the Excise Act, 2001, to provide a general reduction in the rate of excise duty on spirits and also to impose a larger reduction in the rate of duty on the first 100,000 litres of spirits produced by a Canadian distiller. Here are the details.
The first 100,000 litres of spirits produced in Canada by a spirits licensee in a fiscal year would be subject to a new rate of excise duty of $6 per litre of absolute ethyl alcohol, or AEA, which would represent a reduction of almost 50% in the rate in effect. For all Canadian production over and above 100,000 litres of AEA, and for all imported spirits, the general rate of duty would be reduced from $11.696 per litre to $11 per litre.
During my time today, I would like to share several important reasons why the House should not support this bill. As we have indicated many times since our budget was tabled on March 22, the government is determined to help Canada's middle class and those who are working hard to join it. We started working on these challenges in December, by lowering taxes for Canada's middle class and lowering the personal income tax rate from 22% to 20.5%.
On January 1, 2016, Canadians whose taxable income is between $45,282 and $90,563 saw a drop in their income tax rate. They will keep more of their paycheques so that they can save, invest, and help grow the economy.
In total, nearly nine million Canadians now benefit from this tax cut. Single Canadians who benefit from this measure will, on average, pay $330 less in taxes a year. Couples will see an average tax cut of $540 a year.
To help pay for this middle-class tax cut, the government increased taxes for the wealthiest Canadians by creating a new higher income tax rate of 33% for individual taxable incomes in excess of $200,000. Bill C-232 would implement measures that are not necessarily good for taxpayers.
Right now, the Canadian distillery industry exports over 70% of its annual domestic production. Since exported alcoholic products are completely exempt from federal excise duties, most of Canada's spirits production would not be affected by lowering excise duties. Instead, a reduction in the rates of duty would apply to the domestic consumption of Canadian spirits.
However, producers of spirits have indicated that they would use the proposed tax cut to increase their exports. As a result, Canadian consumers risk having to pay the price of the producers' move to charge lower prices on foreign markets.
The general reduction in excise duties proposed in Bill C-232 would also apply to imported spirits that are sold in Canada, which represent almost one-third of all sales in the country. There is no guarantee that those savings would be passed on to Canadian consumers.
If Bill C-232 is passed, it will cost an estimated $55 million a year in forgone tax revenues.
I will now move on to another shortcoming of Bill C-232, namely the problems it will cause for trade, both on the domestic and world markets.
As noted in Budget 2016, an open trade and investment environment allows firms to thrive and provides better jobs for the middle class. The competitiveness of Canadian businesses in the international marketplace will be enhanced by breaking down barriers to trade, both internal and abroad, and providing the appropriate tools and policy framework that allow Canadians to take advantage of new trade opportunities.
For instance, the government recently took the last steps to finalize the Canada-European Union comprehensive economic and trade agreement.
Canada and the European Union both intend to ratify the agreement as soon as possible, so that our citizens can reap the benefits of that excellent agreement.
The government is also determined to strengthen Canada's trade relations with large emerging markets.
Tax policy programs that exclusively target Canadian producers or products could be considered contrary to international trade rules, because they could be considered discriminatory against imported products.
Under Bill C-232, only spirits produced in Canada would be eligible for reduced excise duties at a preferential rate of $6 per litre of AEA for the first 100,000 litres produced.
Furthermore, if the reduced excise duties are meant to benefit Canadian products at the expense of imports, that could jeopardize Canada's exports, including the major component of exports from the spirits industry, if other countries were to take retaliatory measures.
I think it is quite clear that the provisions of Bill C-232 would seriously compromise Canada's position on global markets.
Excise Act, 2001Private Members' Business
April 22nd, 2016 / 2:05 p.m.
Michelle Rempel Conservative Calgary Nose Hill, AB
Mr. Speaker, this is a fitting bill for a Friday afternoon.
First, I congratulate my colleague, the member for Huron—Bruce, who I think has done an excellent job on a bill that would significantly help the prospects of economic diversification in many different corners of our country.
I had a speech prepared, but I actually want to spend time refuting some of the assumptions that have been brought up in some of the questions from my Liberal colleagues today. I hope they will actually consider these points.
From what my colleague, the member for Huron—Bruce said, I believe he is open to amendments, so I hope the bill is not rejected flat out. I will explain why.
As an example, when the wine industry in its present form took root in British Columbia about 30 years ago, it completely transformed the economy of interior British Columbia and of British Columbia as a whole. Today the wine industry in British Columbia is not just about the production of the product itself. It is delicious, and I certainly encourage my colleagues to try some delicious B.C. VQA wine, but what is more important is the number of people employed in the sector, the investments that have been made in infrastructure around the industry, and the hospitality trade in wine tourism. The wine industry has fundamentally changed the region.
Economic diversification is not just about a grant or running a $30 billion deficit; it is actually about making small, meaningful changes that can significantly encourage investments and new activities. That is what Bill C-232 proposes to do. This is one of those small, meaningful changes that can have a significant impact on an entire industry.
What do I mean by economic diversification? Why is the bill helpful?
If the bill comes into force, it would, without a shadow of a doubt, encourage investment by small producers into microdistilleries. We have the data on that. I encourage my colleagues from the Liberal Party to look at the consumer trend reports from Agriculture and Agri-Food Canada showing some of the market indicators on the potential growth in the spirit industry in Canada. There is huge potential for growth here if we have the right economic conditions.
What we are hearing from the industry is that the particular measure that is included in this bill is what needs to happen in order for people to do a few things: make the investment into equipment and facilities to produce the product and, as my colleague mentioned, look at new crops and the diversification of our agri-food and agriculture sector. Also, we need to be more competitive internationally and in the domestic market.
One of the assumptions that came up in the questions was that making this small, meaningful change would somehow reduce government revenue. I firmly push back on that particular assumption, because I do believe what will happen is what we saw in the wine industry when we made certain changes to allow that industry to grow: we saw an enormous growth in the money that comes into Canada as part of Canada's GDP through that industry. When we have made small changes, we have seen more revenue come into the government's coffers. There is more investment and more tax revenue coming from that.
We know that we do not necessarily have to increase taxes to get more government revenue. I actually believe it is the opposite. I believe that when we reduce taxes, people will take more risk. It will incent them to try new products and new programs. That is what this bill would do.
Specifically with regard to the excise tax reduction proposed in the bill, the assumption that because there has been no material, real increase in the excise tax over a period of time, or that there has actually been a reduction, misses the point. The point is that other countries around the world have reduced their excise tax significantly, so when Canadian distillers are trying to get into that market or when Canadian consumers are considering a choice in product, Canadian producers are unduly disadvantaged. Bill C-232 would change that.
This would put Canadian producers of spirits on an even playing field and an even footing, and one could argue they could even go further than some of their international competitors. If we did that, we would see growth in the industry.
Distilleries can impact the economic diversification of virtually any region of the country. We have certainly seen a big increase in the appetite for these types of products.
I will re-emphasize that this is not a niche issue. This industry has had a significant impact on the Canadian economy already. Over 8,500 jobs are associated with the spirits industry. Excise duty revenues have increased by over 40% between 2006 and 2015, which shows that, as the industry grows, government revenue increases. Therefore, if we slightly decrease the excise tax rate to make it more attractive for investment in this industry, we likely will see, based on these forecasts, an increase in revenue over time.
Another very interesting fact in the other economic spin-off is that Canadian distillers use 320,000 metric tonnes of Canadian grain. Spirits producers are the largest purchaser of rye grain in Canada and among the top producers of grain corn in Ontario, Quebec, and Manitoba. Again, this about the economic diversification of not just one industry expanding itself, but it is also looking at how we make our agriculture industry more competitive and more diverse.
According to the Distilled Spirits Council of the United States, 54% of the retail price of an American whiskey sold in the USA is federal, state and local taxes, but a comparable number in Canada for Canadian whisky is 82%. Members can see what a large delta there is in being able to be competitive with international producers.
Canadian whisky and other spirits account for over two-thirds of Canada's beverage alcohol exports, with wine and beer being less than one-third. Therefore, why is the bill important to our international competition? It is because our spirits industry is at the forefront in terms of promoting Canada's brand awareness in international markets on our overall beverage products.
More equitable federal duty rates for spirits are critical to spur growth and investment in industry plants, brands, innovation, and opening of foreign markets. I appreciate some of the comments my colleague from the NDP made as well, but essentially, if individuals are spirits producers or a craft distillers and if they are looking at making investments in expanding their production and want to market overseas or encourage Canadians to partake in their beverages, this is a very clear signal from the government that it is here to support growth.
In my time as minister of state for western economic diversification, I had a small pool of grant funds that were available to fund projects that would hopefully help encourage trade, or skilled labour training, or promote diversity in the economy through developing new and innovative products. Grants are one thing, but sometimes tools like this, where we slightly reduce a tax rate, can be so powerful in sending a signal to the industry that we are serious about seeing it grow.
To me, this is really an easy and simple thing that the government could do to send a signal to the industry that it wants to see this industry grow and that economic diversification is something about which the Liberals are serious.
Many of the speeches talked about supporting the middle class, and this and that. However, at the end of the day, this move would undoubtedly create jobs in Canada. It would make our agriculture industry more resilient, and it would certainly allow new and interesting sources of revenue for producers who might look to enter this market.
Excise Act, 2001Private Members' Business
April 22nd, 2016 / 1:55 p.m.
Pierre-Luc Dusseault NDP Sherbrooke, QC
Mr. Speaker, I am very pleased to speak to the bill introduced by my colleague from Huron—Bruce. I will start by commending him on the initiative he is proposing in the House today.
I am a bit disappointed that my colleague from Gatineau kind of missed the point of the bill, which is to help small producers and microdistilleries that produce less than 100,000 litres of ethyl alcohol a year. I am disappointed that he focused on the modest reduction in excise tax for distillers who produce more than 100,000 litres a year. That is one of the only concerns I have with this bill because it is mainly the major players who will benefit from this modest reduction.
As my colleague explained earlier, the bill primarily addresses microdistilleries, and not multinationals in Canada that essentially do a lot of exporting. Multinational distillers that are set up more or less everywhere do a lot of exporting. However, the bill primarily concerns microdistilleries that produce less than 100,000 litres a year. We have to put that into perspective. I hope my colleagues across the way will appreciate this positive aspect of the bill, because it encourages small and medium-sized businesses.
As my colleague from Huron—Bruce pointed out, microdistilleries are important economic drivers in many regions across Canada. They are small businesses that hire people across the country and try to carve out a space for themselves in a difficult market. All members here will recognize that the spirits and distilling market is a difficult one.
As parliamentarians, we must consider the existing Excise Act and look at how we can give our small businesses better opportunities in a highly competitive market.
Imports are also a huge factor. We export a lot of our products, but in our domestic market, we also import many products from other countries.
That is why I think it is important to focus on microdistilleries, the smaller players that are already operating in an extremely competitive and regulated market. There is a considerable administrative and regulatory burden imposed on distilleries. One would have to read the Excise Act to understand just how how heavy a burden this is on businesses.
The rules are extremely strict, and quarterly reports must be produced, in addition to annual reports. Every litre of alcohol produced must be recorded, bottled, and labelled. This is extremely onerous. Furthermore, distilleries need to obtain licences and renew them every year. Their offices must be accessible to inspectors working under the authority of the Minister of National Revenue. The inspectors must have access to the facilities and be able to review all documentation every year. Often, these are microbusinesses, and we are seeing them all across Canada. It is important to note that this sector is booming right now. Microdistilleries are popping up all over the place, including in Quebec. Some just recently entered the market. Every microdistillery talks about the huge burden associated with starting a business in this sector.
I was talking about licences earlier. Producers also need collateral and substantial start-up capital. It can take time for producers to see a return on their investment, especially if they are making spirits that need to be aged, such as whiskey.
Canadian whiskey has to age in barrels for three years. Producing whiskey requires a substantial investment. People do not see returns for three years, and then only if they did their initial research and development properly so as to end up with a quality product that, three years later, can compete internationally against other quality products.
It is also important to mention the Association of Canadian Distillers. The two members who spoke before me mentioned it. They did a lot of work and research and found that there is a need to restore balance in the gaming and alcohol market in general because some sectors enjoy significant advantages over others.
That is an important point. The Association of Canadian Distillers did the work and came to that conclusion, and they sent the government a budget proposal to reduce the excise tax on the first 100,000 litres of absolute ethyl alcohol for distillers.
Where we have somewhat different views, as I said at the beginning, is on reducing the excise tax on surplus litres, that is, when more than 100,000 litres are produced. We do not see the point of lowering it by nearly 70¢. If we manage to get this bill to committee, would could examine this issue a little more closely.
Furthermore, in this first hour of debate, it is also important to point out the discrepancy with the request from the Association of Canadian Distillers. I would have liked to ask my colleague a question about that earlier, but unfortunately I did not have a chance to do so.
In clause 1 of Bill C-232, which amends section 122 of the Excise Act, 2001, we read the following, “With respect to the first 100,000 litres of spirits produced in Canada...duty is imposed”.
However, the request from the Association of Canadian Distillers talks about the first 100,000 litres of ethyl alcohol. In addition, in his speech, my colleague also talked about 100,000 litres of absolute ethyl alcohol. It might be important to confirm exactly what is meant in clause 1 of Bill C-232, which talks about the first 100,000 litres of spirits produced in Canada.
I think it is important to make the distinction because if we take the first 100,000 litres of spirits, and agree that each litre of spirits produced in Canada contains 40% absolute ethyl alcohol by volume, we might conclude that the first clause of the bill seeks to reduce the excise tax on the first 40,000 litres of absolute ethyl alcohol by volume.
However, I am sure that my colleague meant to focus on the first 100,000 litres of alcohol and not the first 100,000 litres of spirits, because spirits contain more than just alcohol.
I want to reiterate my support and that of the NDP and I hope I will have my caucus' support to send this bill to committee for further study, including another look at the cost. I know that the cost is estimated at $55 million and that in a few years there could be some cost recovery as a result of increased production.
I hope that we will get enough support from our colleagues in the House. I urge all my colleagues on all sides of the House to support this bill and send it to committee, because it is extremely important to support small and medium-sized businesses and the microdistilleries. Distillers who produce less than 100,000 litres of alcohol a year are small businesses, economic drivers of the regions.
I encourage all my colleagues to support this bill.
Excise Act, 2001Private Members' Business
April 22nd, 2016 / 1:50 p.m.
Steven MacKinnon Liberal Gatineau, QC
Mr. Speaker, it is a pleasure to rise on Bill C-232. I congratulate my hon. friend from Huron—Bruce for his quite obviously diligent work on this issue. Perhaps in the future we can contemplate having a wee dram over this or any other issue in the House. I congratulate him on his work. However, sadly, many of us on this side will be unable to support this bill.
The Government of Canada is focused on helping middle-class Canadians have more money in their pockets so they are able to save for retirement and provide for their families.
We know the single-best thing we, as a government, can do for Canadian businesses, including our spirits industry, is to create a strong economy with a strong customer base, a strong consumer base, a middle class that feels confident about the present and the future, and is on a secure financial footing.
This is exactly what the Government of Canada has helped to support and sustain. In budget 2016, we have taken an essential step to revitalizing the Canadian economy. Budget 2016 puts people first and delivers the help that Canadians need. It is an essential step to restore prosperity to the broadest cross-section of our consumer base, the middle class.
That is why the first item the Minister of Finance introduced in his motion earlier this week was the Canada child benefit. Compared to the existing system of child benefits, the new Canada child benefit will be simpler, tax free, more generous, and better targeted to those who need it most. It will put more money in the pockets of nine out of ten Canadian families. Families will receive an average of $2,300 more annually. This is the most significant social policy innovation in a generation.
Furthermore, Mr. Speaker, almost nine million Canadians already benefit from the middle-class tax cut that the government introduced in December. Those measures demonstrate leadership at critical times. They support Canadians when and where they need it most.
Our spirits industry plays an important role in our diversified economy. My hon. colleague gave a good description of the nature of the industry. As we discuss the tax reduction proposed in this bill, it is important to first note that the rates of excise tax have not changed in 30 years. This means that our producers already enjoy a lower real rate of taxation because of the effect of inflation over the years. There are few or no strategic reasons for using the excise tax system to provide financial support to the spirits industry.
Spirits Canada, an important industry stakeholder, has said that any reduction in excise taxes should be reinvested in export markets and used to increase distillers' profit margins. There is no indication that the savings should be passed on to the average Canadian consumer in the form of lower prices.
Our spirits industry is an important player in our diverse economy. As we discuss the rate reduction proposed in this bill, it is important to first note that the excise duty rates have been effectively unchanged for 30 years. This means that our producers are already benefiting from a diminished real rate of taxation due to inflation since then.
There is little to no policy rationale to use the excise tax system to provide financial support to the spirits industry. Spirits Canada, an important stakeholder for the industry, has indicated that any relief in excise duty is meant to be reinvested in export markets and increase the profit margins of distillers. There is no indication that any savings are meant to be passed on to the average Canadian consumer in the form of lower prices.
Indeed, since exported alcohol products are completely exempt from federal excise duties, it is fair to say that the average Canadian consumer would likely pay the cost for producers charging lower prices in overseas markets without benefiting from savings in Canada.
Standard servings of beverage alcohol products, based on a 17 millilitre volume of absolute ethyl alcohol, are subject to varying amounts of federal excise. The higher relative duty on spirits has been a long-standing feature of the alcohol taxation structure both at the federal and provincial levels and is consistent with the fact that spirits are generally higher-value products.
The Canadian distilling industry is dominated by multinational companies that are export oriented, with over 70% of annual national production being exported. Since exported alcohol products are completely exempt from federal excise duties, most domestic spirits production would not be affected by any excise duty reduction. Instead, domestic consumers of Canadian spirits would likely pay for the cost of producers charging lower prices in foreign markets.
A general excise duty reduction would also apply in the bill to imported spirits products sold in Canada, which account for roughly one-third of all domestic sales. If this reduction is similarly not passed on to consumers, it would result in a large windfall gain for either provincial liquor boards, which are the sole legislated importers of spirits into Canada, or the foreign producers selling to those liquor boards.
Perhaps most important, tax policy programs targeted exclusively to Canadian producers or products face, as my colleague for Laurentides—Labelle raised, the risk of being considered offside international trade rules, as this could be considered to discriminate against imported products.
The current excise duty relief provisions targeted for Canadian beer and wine were already the subject of a 2007 World Trade Organization dispute brought by the EU. This dispute was ultimately settled by Canada agreeing to provide compensatory tariff reductions on affected products.
Canada continues to face significant international pressure against its existing measures. Any new tax measure benefiting domestic spirits would probably result in new trade disputes against Canada.
There is another way to look at this issue: if excise taxes were reduced on domestic products and other countries took retaliatory measures, the reduction could jeopardize exports by the spirit industry, which is the very industry my colleague wants to defend. These exports represent a significant part of this industry's activities.
I would also like to point out to the House that establishing a new excise regime for domestic producers could be seen to contradict the position taken by Canada in international trade disputes. At the request of Spirits Canada, Canada recently joined the EU challenge of the discriminatory tax treatment of spirit imports in Colombia.
People work hard, and they expect their government and their economy to work hard for them in return. At the core of our plan is the notion that when we have an economy that works for the middle class, we have a country that works for everyone.
Budget 2016 is the first step in that plan. This approach means new investments in skills and labour strategies, and in innovation to unlock the potential of greater productivity. Those are the real drivers of economic growth and job creation.
Our goal remains the same. We are committed to strong economic growth, and we need the resolve to follow through on sustained strategic investments guided by a vision of the future in which all Canadians have a real and fair chance at success. This is our government's central mission. We are choosing to take advantage of a historic opportunity to invest in people and the economy, and to prepare Canada for a brighter future.
Of course, we recognize that this is only the beginning. We have much work ahead of us, but we know there is no limit to what we can achieve as a country.
Excise Act, 2001Private Members' Business
April 22nd, 2016 / 1:30 p.m.
Ben Lobb Conservative Huron—Bruce, ON
moved that Bill C-232, An Act to amend the Excise Act, 2001 (spirits), be read the second time and referred to a committee.
Mr. Speaker, it is a pleasure to rise today on private member's Bill C-232, an act to amend the Excise Act, 2001, regarding spirits.
I though it would be appropriate to start my speech by declaring that I have no pecuniary interests. I do not own a distillery. I have no plans to own a distillery. I own no common shares in any distillery stocks, so I just do this purely for the sector, for the industry, and for the spinoff benefits it would have for Canadian businesses.
The current lay of the land for excise taxes on spirits in this country is $11.696 per litre of 100% ethyl alcohol. This rate has been in place for many years without any consideration having been given by government to reduce it. I propose at this time that it is time to reduce it in two different ways.
There are many categories, and it depends on which interpretation we take of a small or medium-size distiller, but regardless of that, this measure would apply to all distilleries that operate in this country. It would reduce the excise tax to $6 per litre of 100% ethyl alcohol, and on over 100,000 litres we would reduce it by nearly 79¢ to bring it to an even $11. This is a good move, I believe, and would be beneficial to the sector.
To put it in perspective and to give an idea of what taxes are involved in just a glass of wine, a glass of beer, or a glass of alcohol, in Ontario, for example, with regard to wine, 80% goes back to the distiller or the chain, 4.3% is federal tax, and 15% is provincial tax. For beer, 46% goes back to the industry or the supplier, 11% goes to the federal government in the form of taxes, and nearly 30% goes to the provincial government. Anyone who knows Ontario knows the Beer Store, and its cut is a little over 12%.
However, the difference is significant in the case of distilleries. The issue is that almost 60% goes to the provincial government, over 17% goes to the federal government, and just a little over 23% is returned back to the industry. If we compare the 80% for wine with the 23% for the spirits and distilling sector, we see a big difference. The bill will not close the gap 100%, but it will make a small step forward in trying to level the field and allow more profitability into the sector.
I know all members want to see businesses grow, whether they are small or large. The one thing we do not want to do as legislators is have a tax regime in place that dissuades businesses from setting up and making investments in this country. With the excise tax where it is currently, we have really not seen much growth at all in the sector in regard to new starts. We are hoping that this measure will be a first step.
One question I think everyone in the House should ask regarding the bill is whether it will be WTO compliant and whether there is a chance that a different country or a different jurisdiction will provide a challenge. We feel quite secure and confident that this will not be challengeable at the WTO, because it applies to all distillers. That is very important. It benefits the entire sector, so that is very good.
The other question I would think all members of Parliament would have is the cost. How much is it going to cost? I mentioned how much we are going to reduce the excise taxes, and the example I can give is an example from the U.K. It reduced the excise tax last year, in 2015, by 2%. In January of this year, the Scotch Whisky Association said that it had nearly £100 million to the positive for government revenues.
The idea that a tax reduction can only cost government I think in this case is incorrect. We have good, solid evidence, recent examples that would indicate that a modest excise tax reduction would actually increase revenues to the government.
I would also like to point out that, just in volume increases and other increases that go along with business, from 2006 to 2015, the excise tax collected on spirits actually increased $200 million. We have seen volume increase, and that is great, but there are huge opportunities for this sector.
If we compare the U.S. to Canada and the taxation involved, 54% of the price in the United States goes to federal, state, and local taxes, and it is nearly 80% of the price here in Canada. We need to continue to be more competitive to compete in America and around the globe.
Another unique difference between bourbon in the United States and Canadian whisky is that bourbon needs to be aged for only a year and Canadian whisky needs to be aged for three years. I would think that around the world, Canadian whisky is viewed as a premium product, but there is a premium amount needed and required to be warehoused, so we also need to be mindful of that.
If we look at the broader market, this is a very significant market worldwide. This is an $8-billion a year market worldwide. Canada has a pretty good chunk of that market. We are in at around $700 million, but we have huge potential and opportunity to actually reach about $2 billion of that market. We could potentially play around 20% to 25% of the market. One of the big reasons is that so many of our brands that we know here are really recognized around the world.
Spirits in this country represent $5.8 billion to Canada's GDP, and represent over 1,200 jobs directly, almost 9,000 in total. It is a huge employer. We can just imagine from the crop in the field to the bottle on the shelf all the different hands and businesses that would be involved to get to that number in this country.
I would also like to mention about the market, just to put in another comparable, that there are 60 to 70 distilleries in this country. There are about five or six significantly large distilleries and a few micro or small distilleries. However, looking at one small sector, there are over 800 small craft distilleries in the United States. In my speech later on, I will reference the opportunity of niche markets with those as well.
The other thing I want to talk about is the large distilleries such as Gimli Distillery in Manitoba and there is a few in Ontario as well. They need to reinvest in their plant and machinery, and a 6% reduction in the excise tax would be very significant for them. It would allow them to invest in green technologies. Many of the plants have some form of green technologies already, closed water loops and many other pieces of their plant, but that would allow them to continue reinvesting in green technologies in the plants. In addition to that, there is bottling and packaging. It would allow them to be competitive on the world market to make sure we do not lose packaging and bottling contracts to the United States. We want to make sure that plants are able to do that.
In addition, I mentioned that Canadian whisky needs to be stored for three years. Therefore, we need storage and additional warehousing. If we are to grow the industry to $2 billion a year, we will need some significant investment in warehousing. We need the large companies in this country to be able to afford to make those investments here and to grow.
I would also like to mention that in addition to the plant and machinery, there is a significant amount of marketing that needs to take place, not only here domestically but around the world.
We have significant markets in China, Japan, obviously in the United States, the U.K., and many other countries around the world. We are competing in a global market which becomes more global each and every day. We need to continue to allow those large companies to make investments in their marketing.
Up until 2010, Canada had the number one whisky in the United States. We need to make sure that we do our very best to get back into that and become competitive.
I come from a rural riding. Farmers are going to benefit from this as well. There are 320,000 tonnes of rye, corn, etc., and in some cases even wheat that go into this industry. Ontario, Quebec, Manitoba, Saskatchewan, and Alberta are huge suppliers of grains. With rye, for example, distilleries are the number one consumer and purchaser of rye and a huge purchaser of Ontario corn as well.
One thing some people in the House may not know is that when a commodity such as rye or corn goes into a distillery, that is not the end of its life. After it has been fermented and distilled, it becomes distillers grains. At that point, they are in huge demand by beef farmers, dairy farmers, and pork producers. They use it in their feed ration. That is another green example of what the industry is and it also leads to some niche opportunities like the United States has.
There is a distillery in Florida. I have not visited it but I have read about it. They have a ranch and on the ranch they obviously feed their cattle. The grains that go into the distillery are kept and fed to the cattle right on the ranch.
There are huge opportunities down the road in the agriculture sector and for farmers to be able to grow the crops on their farms, to be able to potentially afford to have a distillery on their farms, similar to what many wineries and breweries do. It could increase tourism around the rest of the country as well.
It would also allow agriculture, science and technology, and industry to partner together to create new and innovative varieties of crops, specific ryes, different wheats, that would cater to their niche market. One example, which is on a much larger scale, is rye grown in Saskatchewan that Crown Royal used for its world award-winning Northern Harvest Rye. These are the kinds of partnerships and initiatives that can really spur growth and really help farmers and the industry.
In the few minutes that are left, I would like to thank my staff and the opposition leader's office for their help. I would like to thank the Library of Parliament for its help guiding us along the way, Jan Westcott at Spirits Canada, and of course Still Waters Distillery in Concord. Barry Stein and Barry Bernstein have been a tremendous help in providing information and input about the benefits to this industry.
The last thing I will say is about small craft distillers. This is the biggest opportunity this country has in this sector. It is untapped. It really could unleash with the changes that we are proposing here in literally every member of Parliament's riding around the country. Not every riding has a distillery, but it certainly does not matter if one is a government member of Parliament or in the opposition, there are distilleries in some members' ridings and with the opportunity for many more.
The problem is the way the current system is set up with the excise tax and the requirements from CRA in the warehousing, it is a huge impediment to opening up a new business. What we do not want to have in this country is taxation and regulation being the reasons that we do not open up new businesses.
In the province of Ontario where I live, the LCBO is starting its modernization project. It is going to be less of a burden and less of a barrier to these new businesses. It is also time for the federal government to be a proactive partner, take a first step, and take a look at this.
We want to get this thing done. We are open to suggestions and ideas from other members. If they have amendments, or if they would like to see changes or additions, this is not cast in stone. We are open to ideas. I look forward to questions.
Excise Act, 2001Routine Proceedings
February 25th, 2016 / 10:05 a.m.
Ben Lobb Conservative Huron—Bruce, ON
moved for leave to introduce Bill C-232, An Act to amend the Excise Act, 2001 (spirits).
Mr. Speaker, I rise today to introduce my private member's bill, seconded by the hon. member for Brantford—Brant, to reduce the excise tax on spirits.
Canadian spirits are world renowned, and our nation produces premium products that represent nearly $1 billion in exports each year. Lowering the excise tax rate would allow the Canadian spirits industry to invest and be more competitive in the global market. Canadian agriculture and tourism industries would also benefit from a more competitive spirits sector.
(Motions deemed adopted, bill read the first time and printed)