When the excise escalator was put into place in the budget, the question was asked to finance officials whether or not they had done any analysis on this introduction. The response was no, they had not.
We did engage an economist, based upon the economic model that we released in March of this year, to see what the impact was. Based upon price elasticities of consumers purchasing wine, if the excise increased by 2% every year and the industry passed that on to the consumer, given that the wines that are affected are value brands, the consumer is very price conscious, so they would move away. They would demand something else and the industry would lose out.
As we modelled that through our economic model and seeing what the impact would be on the total economy, the results that came out were that the increased excise on these Canadian-produced wines would result in additional revenue of roughly $8.5 million per year over the five-year period that we studied, that federal taxes would go down by about $7.9 million based upon a decrease in demand, and provincial taxes would go down by about $7 million. The end result would be a gain to the federal government, in terms of taxation, of roughly $500,000 per year on average over the five-year period.
However, the decrease in demand, the impact on the total economy as we are a $9-billion industry, as you work through to the liquor boards, to the restaurants, to the truck drivers, everything else, the direct, indirect and induced impact of the excise escalator over that five-year period would be a loss to the economy of $87 million.