Thank you, Mr. Chairman and members of the committee.
My name is Jan Westcott, and I'm the president and CEO of Spirits Canada.
Spirits Canada is the sole national organization representing Canadian spirits manufacturers, exporters, and consumers. My remarks today are expressed not only to these affected parties but also to the thousands of Canadian SMEs providing critical goods and services to spirits producers. I am also addressing Canadian farmers of cereal grains such as barley, corn, rye, and wheat, which are intrinsic to the domestic production of distilled spirits.
Given the limited time today, I'm going to focus my comments on the ill-conceived suggestion that we return to the failed policies of the past and reintroduce the automatic indexing of excise duties on liquor.
As my colleagues have said, members have heard testimony from the finance department that no—and I underline no—economic analysis or modelling was undertaken to support the indexing of excise duties on beer, wine, and spirits, since in their view the changes were too minor to warrant such an effort. Thankfully, it's extremely rare that we hear such misguided hubris from public officials here in Ottawa.
The department's own supplementary budget information indicates that these measures will expropriate in excess of $470 million between now and 2022, a calculation based solely on the direct increase in excise duties. In what bubble is an additional $470 million lifted from the wallets of hard-working Canadians, trivial or de minimis?
The department, however, has provided no estimate of the overall impact on Canadian consumers of the proposed indexing measure, taking into account the compounding effect of a subsequent cascading of ad valorem provincial and federal taxes such as the GST.
Finance has a worrisome penchant of looking at liquor excise duties in isolation, disregarding liquor taxes imposed by other levels of government and their impacts on employment and investment, while ignoring the ultra-competitive nature of the international whisky trade and dismissing the windfall gains to the treasury thanks to the GST, particularly on sales through on-premises channels like bars and restaurants. By the way, the excise in Canada is 67%—that's right, 67%—higher than the excise on spirits in the United States.
Best practices in other jurisdictions include the issuance of white papers, consultation papers, transparent decision-making processes and, above all, rigorous economic analysis. All these best practices have been noticeably absent from the process of introducing the automatic indexing of excise duties on Canada's liquor.
Our own internal analysis indicates an overall impact in excess of $1 billion by 2022—not the $470 million you're hearing. That's more than double the amount identified in the supplementary budget papers. It amounts to $1 billion hijacked from your neighbours' pockets, whether they enjoy an occasional drink at home or in the tens of thousands of licensed bars, restaurants, and lounges in every city, town, and village in Canada. However, it's still not worthy of a formal impact statement, because—stunningly—it's viewed by some as too small.
Perhaps it's more accurate and to the point to state that no formal analysis is required, since we already know the impact. We have lived through this same nightmare before. Canada experimented with automatic indexing of liquor taxes between 1981 and 1986, with devastating consequences for Canadian workers. The spirits industry alone shuttered a dozen production facilities across the country in that decade, putting those Canadian workers out of jobs.
Those plants never reopened and those jobs never returned to Canada. We downsized our businesses, reduced our grain purchases, scaled back our investment in foreign markets, eviscerated our innovation budgets, and tried to hold on for survival.
Eventually, after the imposition of devastating harm by our own government and the loss of the only livelihood available to thousands of Canadian families, it was recognized—even here in Ottawa and in Parliament—that the automatic indexing of excise duties on alcohol products, in accordance with a rigid formula such as the CPI , was completely inappropriate, and indexing was abandoned.
The automatic indexing of excise duties on alcohol, in accordance with a rigid formula such as CPI, was not appropriate then and it is not appropriate now.
It is said that only a fool learns from his own mistakes, and it is a wise man who learns from the mistakes of others. I have little doubt as to the wisdom of the honourable members present, and I hope we can count on your support for an amendment to repeal the proposed automatic indexing of excise duties.
Thank you for your attention.