July 30, 2020

Canada Agrees to Tax Homegrown Wine in Trade Settlement

B.C.’s wine industry is hoping the Trudeau government can find a solution after Canada agreed to reimpose a federal excise duty on domestic bottles as part of a trade dispute settlement.

The British Columbia Wine Institute (BCWI) estimates that the cost of a case of Canadian wine would rise by about $6, if a new provision in Canada’s trade truce with Australia announced Monday comes to pass, following a two-year grace period.

“That’s pretty material to Canadian wine growers and farmers, and so we’re unhappy about that,” said president and CEO Miles Prodan. “We’re in discussions with the feds as well, how can they help us with that.”

International Trade Minister Mary Ng announced on Monday that Canada had reached a “partial agreement” with Australia over its World Trade Organization challenge against Canada’s treatment of imported wines.

As part of the agreement, Canada agreed to repeal a 15-year-old exemption to the federal excise duty that it had been giving to wine produced in Canada and made from entirely Canadian products.

The change is expected to occur by June 30, 2022, according to Ng’s announcement.

Australia’s dispute was launched in January 2018, and includes other concerns, some of which were addressed on Monday that pertain to policies and regulations in Ontario and Nova Scotia.

But the removal of the excise exemption for Canadian wine affects the industry nationwide, Prodan said, not just the $2.8-billion industry in British Columbia.

While he said he was satisfied that the situation was being resolved through a negotiated settlement, as opposed to a WTO ruling, he said it will be a shock to many younger wineries.

In 2006, the former Harper government, newly elected to power, brought in the exemption for wine made from 100 per cent Canadian-grown products in Budget 2006, meant to give domestic winemakers a competitive edge.

In a statement issued Monday, Wine Growers Canada, the national industry association, said the excise exemption had “supported investment in more than 400 new wineries and 300 winery modernizations” over the 2006-18 period.

Australia’s B.C.-specific concerns had already been addressed, said Prodan, through other trade talks related to the United States-Mexico-Canada Agreement (USMCA).

USMCA, which is the replacement for NAFTA, included a “side letter” where B.C. had agreed to stop restricting the wine sold on its grocery store shelves to provincial wine only, as of last November.

That policy, which had been brought in by the B.C. Liberals in 2015, forced international wines into “stores-within-a-store.” Monday’s agreement addresses similar issues.

Ontario, for example, agreed to eliminate the tax difference between provincial and non-provincial wine sold at wine boutiques.

“The agreement reflects Canada’s strong commitment to the rules-based international trading system, which is incredibly important for our businesses during these challenging times,” said Global Affairs departmental spokesperson Ryan Nearing.

(Source: National Observer)