Thank you very much, Mr. Chair.
My name is C.J. Helie. I am the executive vice-president of Spirits Canada.
The Canadian spirits industry is a local industry employing hard-working Canadians across the country, and we are proud purchasers of the finest cereal grains bounty that Canadian farmers produce. In many parts of the country, we are well into harvest time, and our master distillers are keen to get their hands and their well-trained noses into this year's crop.
Made from locally sourced barley, corn, rye and wheat, Canadian spirits and our signature product, Canadian whisky, can compete with the best from around the world. Compete and succeed, but not with two arms tied behind our backs.
Our member companies are primary manufacturers, sourcing local agricultural products transforming these into high value-added branded consumer products of the very highest quality. We are an industry with a history that predates Confederation and an international reputation for making truly great whisky.
Recently, however, we feel very much like the proverbial canary in the coal mine. Unfortunately, the canary died, very few paid attention, and no lessons were learned. The Department of Finance, once renowned for their professionalism and expertise, has in our view unfortunately lost touch with hard-working Canadians.
In many instances, the department's advice to ministers and to members today now appears largely limited to wealth redistribution and ignores the most basic principles of wealth creation. Finance officials, hiding behind the principle of budget secrecy, have essentially built walls to insulate themselves, and it is now extremely challenging for wealth creators—large, medium, or small—to have meaningful dialogue with Finance officials. Nowhere is this unfortunate dynamic more prevalent than within excise duty policy.
On April 1, 2018, under a dubious provision included in last year's federal budget, beverage alcohol duties will increase by CPI. It's certainly foolish, but unfortunately it's no April Fool's joke.
Given the excise duty's carve-out for Canadian wines, the measure is a clear and distinct breach of Canada's international trade obligations. Due to Finance's lack of consultation with Global Affairs Canada or other trade experts, we understand that Canada's entire federal beverage alcohol excise duty structure may now be part of the NAFTA renegotiation, will be a focus of the new dispute settlement provisions of CETA, and may be a catalyst for a potential WTO dispute by a range of Canada's major international trading partners.
Some have stated that last year's increase of seven cents on a bottle of spirits—mind you, 21 cents at retail—was insignificant and that this year's automatic increase will be insignificant, yet as the evidence provided to this committee by Finance officials themselves shows, no analysis was undertaken by those responsible to substantiate those claims. The unfortunate reality for spirits is that the automatic annual increase in excise duties is akin to one more turn of a tourniquet wrapped around the neck of the Canadian spirits industry. A difficulty in breathing has become life-threatening.
In fact, the industry has already felt a compelling investment chill. The prevailing international sentiment is that Canada is no longer open to investment in the sector.
Canadian spirits and our signature Canadian whisky franchise now faces even stronger headwinds, headwinds that have recently pushed Canadian whisky behind Scotch, American and Irish whiskies on the international market.
Canadian spirits, as the most highly added-value Canadian processed agri-food products, made here by Canadians, from Canadian-grown produce, we respectfully suggest, deserve more than to be milked dry by excessive taxes, taxes that account for 80% of the retail price of a typical bottle of spirits.
Truly progressive tax reform needs to be about more than simply taking more. It must instead be based on sound, transparent principles such as fairness, equity, and global competitiveness. The current excise duty structure and its ill-advised, new automatic escalator clause failed to meet these guiding principles. We hope the committee will recommend two adjustments to the current excise duty structure. One, the immediate elimination of the annual automatic escalator clause for beer, wine, and spirits introduced last year. Two, the adoption of a reduced excise duty rate on each spirits producer's first 100,000 litres of pure alcohol sold in Canada each year, a step system similar to that already in place for beer. A profitable home market is essential to any international success. Moreover, continual reinvestment in facilities, in people, in product innovation, in market development, and in the Canadian whisky franchise itself is a prerequisite for a sustained domestic spirits industry. Canadians will always drink and enjoy spirits. The questions are whether these will be made by Canadians from Canadian inputs, and whether spirits exports from Canada will continue to be a wealth and jobs creator for the country.
Thank you. I will be pleased to answer any questions the committee may have.