Thank you, Mr. Chair.
The Canadian Vintners Association, better known as the CVA, represents all-sized wineries operating in Canada and our members are responsible for more than 90% of the wine produced across this country. Over the past 30 years, industry leadership has elevated grape and wine quality to ensure survival in a highly competitive global marketplace. It has not been an easy road, and since the signing of the Canada-U.S. Free Trade Agreement, our wine sales market share has, in fact, dropped, from 49% to 32%. Despite this loss, we have grown and today we contribute $9 billion to the Canadian economy, support 37,000 jobs, contribute $1.7 billion in taxes, and attract four million tourist visits every year.
Canada is the second fastest growing wine market in the world, with wine consumption growing three times faster than the global average. Not only has per capita wine consumption in Canada grown by 27% over the past decade, but our sector has invested in 300 new grape wineries over the same period, growing VQA wine sales by 17.5 million litres, the value of which today contributes an additional $1.97 billion to the Canadian economy every year. These same premium wines have an economic impact of $90 per bottle, compared to $15.50 for every imported bottle of wine sold in Canada. The differential provides a real economic opportunity, especially given that the past decade has seen imports capture 70% of Canada's total wine sales growth.
Like other wine-producing countries, we know that the Canadian wine industry can make a larger contribution to the national economy, but we must first overcome challenges such as the removal of interprovincial barriers to trade, and the competitive forces of some of the largest wine producers in the world, which have benefited, and will benefit, from CETA, NAFTA, and possibly the TPP. These three agreements alone represent 90% of total wine volume imported into Canada, valued at over $2 billion—import, not retail value—representing approximately 400 million litres. It's important to clarify that these foreign imports are heavily supported by their governments. For example, the European Union's 2017 national wine envelope program funding is $1.83 billion. Further, the Journal of Wine Economics recently published that total EU wine sector support averaged $3.4 billion annually over the period 2007-12.
Budget 2017 sets a target of increasing agrifood exports to $75 billion annually by 2025. As such, it is timely for the federal government to support the Canadian wine industry's growth to take advantage of rapidly expanding sales opportunities, both across Canada and beyond our borders. Trade is not one-sided, and like our competition, the Canadian wine industry must be in a position to take full advantage of the opportunities that trade agreements, such as CETA, NAFTA, and possibly the TPP offer.
Our 2018 pre-budget submission puts forth three recommendations. First, it is important to reiterate that the recently legislated annual inflation indexation of the wine excise duty will negatively impact Canada's wine value chain. Recent CVA economic analysis has concluded that over the next five years excise duty indexation will, on average, raise an additional $8.45 million in annual excise revenues from affected Canadian wines. This will increase consumer price and reduce demand, resulting in an average annual national economic impact loss of $87 million through the value chain. The cumulative negative effect will climb as high as $110 million in 2023. To reverse this negative impact, the CVA recommends that the government review the excise duty structure on wine sold in Canada, including the legislated annual excise duty increase, with the goal of growing the Canadian wine industry and stimulating tax revenue.
Second, there is a real need to spur investment and innovation to facilitate the growth and expansion of Canadian wine businesses.
Mr. Chair, last December, this committee recommended that the federal government support innovation in the Canadian wine sector through improved operational and infrastructure investments. We agree with this recommendation and also support the government's recent introduction of the strategic innovation fund, which is now available to Canada's six highest growth sectors, including agrifood, providing the opportunity to deliver the growth potential offered by our wine industry innovation program recommendation, better known as WIIP.
Like the strategic innovation fund, WIIP has been designed to support growth, productivity, and competitiveness through improved operational and infrastructure investments. Our five-year WIIP proposal would benefit every winery in Canada and is estimated to provide a 38-fold return on the federal government's investment while supporting an additional $7-billion contribution to our sector's national economic impact.
Our final recommendation is focused on the application of the small business deduction. The problem facing many wineries is that the qualifying taxable capital test restricts access to the lower tax rate to the first $500,000 of eligible income, penalizing capital-intensive wineries with holdings of high-cost farmland, processing facilities, retail stores, restaurants, etc. Wineries with taxable capital valued below $10 million have access to the full benefit from this tax measure, while those with in excess of $15 million are ineligible.
While the costs to these typically small and medium-sized family businesses have increased annually, profit margins remain low and the taxable capital threshold levels have not been adjusted to inflation for 23 years, since the measure was introduced in July 1994. CVA recommends that the federal government exempt the qualifying taxable capital thresholds for agriculture and agrifood sectors, providing full access to this tax benefit. Any loss to the treasury would be used by industry to stimulate investment and help achieve the ambitious target of increasing agrifood exports to $75 billion annually by 2025.
Thank you.