Few sectors in Canada have as many taxes and levies on their products as the spirits industry.
This heavy toll makes it difficult for smaller craft distilleries to remain competitive, and many smaller operations all across the county are starting to speak out against the high excise tax.
Sacha Elez is the CEO of Smooth 42 Craft Distillery, a local business located in the hamlet of Brownlee. He says that the $12.37 per litre federal excise tax takes a huge toll on their ability to grow as a business.
"It basically takes a big chunk of our profit margin right off the top and gives it to the federal government. I think that it's a fair argument that the excise tax hurts small businesses by reducing our profitability and competitiveness when dealing with the massive conglomerates that only need to make a few cents per bottle."
Currently, the Craft Distillers Guild of B.C. is calling on lawmakers to reduce the excise rate for small distilleries. Similar legislation was recently introduced in the United States in 2017 and Tyler Dyck, president of the Craft Distillers Guild of B.C., said the results benefited everyone south of the border.
“With the U.S. government giving up a little upfront excise revenue, small and medium-sized American distilleries had additional cash to invest in equipment, labour and marketing. It worked fantastically well in the U.S., with almost 1,000 new distillery startups since its implementation and tens of thousands of jobs created,” said Dyck. “And the best part is that all of the economic development is local and spread out across all parts of the country.”
This may have given the American craft industry a boost, but Elez says that if the Canadian government doesn't follow suit soon, it could jeopardize local distilleries here at home.
"There's no way that a craft distillery in our position can compete in the U.S. market. We haven't even looked at trying to export down there...But if the taxes were lower it would allow the small guys like us to be more competitive and get into new markets."
Elez goes on to say that he doesn't understand why businesses like his are penalized when locally grown wines don't face the same kinds of levies.
"They actually don't charge any excise tax on wines that are made with 100% Canadian inputs. I don't know why they won't extend that courtesy to crafts spirits that are made with Saskatchewan grain. A number of our products are made with alcohol that is 100% from our province. If we're adding value to Saskatchewan agriculture by processing the grain into alcohol, then we feel that it's a strong argument to not just reduce the excise tax but to also get an exception like the wine industry has."
He points out that Saskatchewan is the largest wheat producer in Canada and that if the weight of taxes was lifted, the province could become a global supplier of alcohol.
"We're in a unique position here in Saskatchewan. If the red tape was reduced, we could be supplying many parts of the world that don't have the same agricultural industry to support their own alcohol production. I think we'd see a new revenue stream and an increase in our GDP. The amount that the province would gain long-term would far outweigh the temporary reduction in tax revenue."
Elez and his colleagues have voiced their concerns with the Saskatchewan Liquor and Gaming Authority and are encouraging fellow craft distillers around the country to speak with their local representatives as well.