Unfairness in regulation and taxation is an area of particular concern to chambers of commerce.
One sector where this unfairness is particularly concerning is within alcohol production and sales. Wineries and craft breweries have come a long way in Ontario and contribute to a thriving manufacturing and agriculture industry. But in many ways, cideries and distilleries have been left behind. It’s stifling growth within the sector for businesses across Ontario.
For this reason, the Peterborough and the Kawarthas Chamber of Commerce partnered with the Prince Edward County Chamber of Commerce, Port Hope and District Chamber of Commerce and several others to put forward a renewed policy resolution titled In the Spirit of Business. This policy resolution was approved by members of the Ontario Chamber of Commerce and will be part of their advocacy platform for the next three years.
Here is our resolution:
Currently, the policy regime applied to craft brewery and winery industries is not aligned with the one applied to the craft distillery industry, resulting in challenges for growth and sustainability of the sector as an integral part of Ontario’s economy.
Craft distilling is an industry in rapid growth. Distillers are creating jobs and boosting economies in large and small centres. The segment supports 6,000 jobs in Ontario and annually contributes $1.5 billion to Ontario’s Gross Provincial Product, while craft distillers and the spirit industry generate over $2.5 billion in annual sales.
The spirits industry works closely with local farmers, connects to tourism and hospitality industries, and contributes to the economic growth of rural areas across Ontario.
However, significant challenges still need to be addressed, i.e., tax at craft distillery tasting rooms is 61.5%, which is 10 times what Ontario wineries pay. Additionally, craft distilleries do not receive recognition for using ingredients produced in Ontario.
For these reasons the craft distillery industry should be considered in policymaking.
The province of Nova Scotia continues to be a leader in the spirits industry since the government opened the door to growth in 2014 by reducing the markup by 60-80% with another 10% mark down if distillers use provincially grown agriculture products. The government cut the license fee from $2,000 to $500, increased production threshold, and introduced a graduated markup based on annual production. These measures allowed craft distillers to thrive. In British Columbia, since the introduction of a graduated tax system, the industry has grown from 17 to 48 distilleries in the province.
Craft spirits are considerably more laborious to produce than large-scale industrial spirits and are also marketed at higher prices. Any short-term revenue reductions from lower LCBO markups and tasting room taxes will be surpassed by the increased revenue from higher employment and consumers supporting local premium spirits that will come from a thriving craft distillery industry.
In the past few years there has been some movement towards parity with other craft alcohol industries, such as:
• Allowing craft distillers to distribute their products to bars and restaurants.
• Allowing craft distillers to open “Pop-up” retail stores via Special Occasion Permits; and
• The continuation of “The Small Cidery and Small Distillery Program” for a three-year commitment (expires in 2025).
Craft distillers believe these changes are a step in the right direction, but additional changes are required to reach parity with other craft alcohol industries in Ontario. For example, the update to “Canada’s Guidance on Alcohol and Health” recognizes that the consumption of beverage alcohol is equivalent across different categories, therefore craft distillers believe it is possible to have all regulations regarding alcohol align to the same standards.
This call for change is not only coming from the chambers of commerce and boards of trade but also from Craft Spirits Ontario.
We are urging the Government of Ontario to:
1. Approve the continuation of “The Small Cidery and Small Distillery Program” until 2027 and that both industries be considered in tandem moving forward.
2. Remove the LCBO fees applied to sales from craft distilleries and craft cideries directly to licensees and by-the-glass sales.
3. Align the craft distiller's regulations with the craft beer and wine industry by applying a graduated rate to the current spirits basic tax, with a zero percent markup on the first 50,000 litres sold.
4. Lower the LCBO markup on spirits and ciders made primarily with Ontario ingredients by Ontario facilities to be equivalent to microbreweries, graduated by production method and volume.
The Peterborough and the Kawarthas Chamber of Commerce acts as a catalyst to enhance business growth, opportunity, innovation, partnerships and a diverse business community.