Thank you, Mr. Chair.
The Canadian wine industry is a $9-billion industry that manages 31,000 acres of vineyards, produces 85 million litres of wine, employs 37,000 Canadians and pays $1.7 billion in annual wages. In addition, Canada's wine sector attracts roughly four million tourists every year.
As as result, the national economic impact of a bottle of 100% Canadian wine is $90, or six times more than a bottle of imported wine sold in Canada. This poses an opportunity and a challenge: an opportunity because Canada is the wine market with the second-fastest sales growth in the world, and a challenge because we're the world's sixth-largest wine importer, with 91% of wine imports entering Canada tariff-free.
In our pre-budget 2019 submission, the CVA has proposed two recommendations.
The first is the immediate need for the federal government to prioritize the removal of interprovincial barriers for both personal transport and direct-to-consumer delivery of alcohol across Canada. Significant attention is rightly paid to international trade agreements, but we cannot forget to lead by example at home. Barriers to alcohol trade are long-standing, unjustifiable and costly trade irritants that must be resolved. Vulcanizing our already small domestic market and making it harder for Canadian wineries to grow and realize the economies of scale and other efficiency attributes of larger international competitors must be eliminated. This would benefit all Canadians through greater interprovincial commerce.
More than six years have passed since the historic passage of Bill C-311, yet only three provinces, representing 19% of the Canadian population, have amended their laws to allow for personal transport and interprovincial winery-to-consumer delivery. As such, it was a positive signal that the new Minister of Internal Trade's mandate letter outlined the importance of collaborating with provinces and territories and eliminating barriers to create a stronger, more integrated Canadian economy while fully exercising federal jurisdiction as outlined by section 91.2 of the Constitution Act and Supreme Court decisions on the regulation of trade and commerce.
When the first ministers conference takes place this fall, it is critical that the federal government lead by example and take every measure possible to allow Canadian wineries to enter the 21st century by supporting the implementation of interprovincial winery-to-consumer delivery across Canada.
Our second recommendation calls on the federal government to amend the Excise Tax Act and to eliminate the legislated annual inflation indexation of the excise duty on wine. Canada already has among the highest wine excise duty rates of any wine-producing country in the world, and inflation indexation will continue to negatively impact Canada's wine value chain. This is too rigid a tax policy.
Not only do economic circumstances vary across all regions of Canada, but Canadian wine producers risk losing market share to much larger global players if we pass the increased excise duty cost on to consumers. Canadian wines compete against thousands of wine brands, with imports representing the majority share of both value and premium-priced wines. It is important to reflect upon the size of our industry, considering that each of the top eight wine companies in the United States produces more wine than the entire Canadian wine industry. With a 33% market sales share in Canada, we lack pricing power, and as a result the unintended consequence is a government-imposed producer tax, placing business revenues, wages, taxes and jobs at risk.
Today, the Canadian excise duty on wine is double the rate of our largest trading partner, the United States. To make matters worse, effective January of this year, the U.S. government reduced its excise duty from 37¢ per litre to as low as 2.4¢ per litre by way of an excise tax credit, with full excise paid only beyond 2.35 million litres of wine.
The impact of inflation indexation and changes to a competitive tax policy is why parliamentarians should have the final say on all tax increases. Given the broad economic implications of legislated excise duty indexation on the entire wine value chain from producer to restauranteur, the CVA recommends that the government amend the Excise Tax Act to remove the legislated annual excise duty inflation adjustment.
Thank you very much.