Mr. Chairman and honourable members of the committee, thank you for the invitation to appear here this afternoon.
The government took one step forward and two back on domestic brewers this past year. Today I will ask the finance committee to recommend that the government point all its policies in a positive, growth-oriented direction aimed at helping brewers be more productive and more competitive.
Beer Canada is a national trade association with 50-plus members that combined operate 78 brewing facilities across 10 provinces and one territory. The supply and demand for beer, according to a 2013 Conference Board of Canada report, indicates that the demand for and supply of beer causes a chain of economic activity that supports more than 163,000 Canadian jobs and generates $5.8 billion in federal, provincial, and municipal tax dollars.
Canada has a real advantage in brewing beer. High-quality malting barley is an essential ingredient in beer, and we grow enough of it in Canada to supply the local brewing industry. We have local malting houses, local bottle shops, can manufacturers, and packaging manufacturers, and we even have five post-secondary institutions offering programs tailored to beer industry jobs. We also have locally grown hops re-emerging as a domestic supply source. Our country has all the agricultural and manufacturing assets needed to make great beer.
Beer has a very large domestic economic footprint. As a result, every dollar spent on beer in Canada generates more than a dollar—$1.12, in fact—in value-added economic activity. This is in addition to beer's tax multiplier effect.
It is in our country's national economic interest to have policies and laws that help domestic brewers compete and grow. The government took a helpful step forward in May of this year when a delegation of Canadian brewers, large and small, met with the Honourable Lawrence MacAulay to learn that the government was committed to modernizing the federal beer standard under the food and drug regulations. The express purpose of this modernization initiative is to ensure that brewers have the tools necessary to innovate and compete in today's marketplace. The Prime Minister set job creation and innovation in the ag sector as overarching goals for the Minister of Agriculture, and Canadian brewers are thankful that the government has taken action to help our industry.
In contrast, budget 2017 took two steps backward. It raised excise rates on beer with no warning and no transition time, and it introduced a mechanism designed to increase federal beer taxes every year with no trigger for review, no end point, and no parliamentary oversight.
Higher excise rates went into effect the day after the budget was tabled and added $12 million in costs to domestic brewers, but the bigger surprise was the mechanism that will automatically increase excise duty rates every year by the rate of inflation. This mechanism is set to kick in with the first annual increase on April 1, 2018. The finance committee can help the domestic brewing industry by recommending that this tax escalator mechanism be repealed before it takes effect.
As tax policy, increasing excise duty automatically every year is unfair to beer drinkers, too rigid to accommodate regional economic differences, and inappropriate given the challenges the beer industry faces today. On average, the tax on a case of beer already makes up 50% or more of the final retail price, depending on the brand. Per capita beer sales declined 10% between 2006 and 2016. Beer's share of the beverage alcohol market dropped 6.4 percentage points in dollar terms over this 10-year period. While Canadian brewers remain strong in their home market, their sales in volume terms have dropped by the equivalent of 8.3 million cases of 24 bottles since 2006.
If domestic brewers gained those sales back, it would generate $298 million in GDP and $117 million in additional tax dollars every year. Automatic annual tax increases are not going to help the domestic brewing industry gain back those sales.
Today, on behalf of the Canadian brewing industry, I'm asking that the committee recommend the repeal of the annual escalator mechanism now baked into the Excise Act as a result of budget 2017. If acted upon, this recommendation would be a positive signal to our industry that the government aims to be consistent in its policies and truly wants to help domestic brewers be more productive and competitive in the years ahead.
Thank you for your time this afternoon. I look forward to your questions.