Question Period – June 13th

Question to Senator Peter Harder, Government Representative in the Senate, once again concerns the impact on the beer, wine and spirits industry of the excise duty escalator in Bill C-44.

Read the full text from Question Period here.


Indexed Tax on Beer, Wine and Spirits

Hon. Larry W. Smith (Leader of the Opposition): My question today for the Leader of the Government in the Senate once again concerns the impact on the beer, wine and spirits industry of the excise duty escalator in Bill C-44, by which tax increases will be automatically indexed to the rate of inflation year after year.

Senator Harder, in answering my question last week, you stated:

Let me assure him and all senators that, as in all tax measures, the Department of Finance did undertake an impact analysis. I am assured by the analysis that the measure will increase the rate of excise nominally; I believe it is five cents on a case of beer.

I believe the 5-cent figure the Government Leader was referring to was the impact of raising the excise tax by 2 per cent immediately, as Bill C-44 requires.

Meanwhile, in our National Finance Committee meetings, the chief of the Sales Tax Division in the Tax Policy Branch of the Department of Finance Canada stated, on the escalator tax:

No estimates were made because the effect was considered too small to have an impact, especially because the 2 per cent is being applied to a component that is already very small in relation to the final price of the product projected to the consumer.

Luke Hartford, president of Beer Canada also confirmed that their industry was not consulted on the escalator tax.

Senator Harder, could you please confirm that no specific analysis was conducted on the escalator tax? If this is true, indeed, then why did your government decide to go ahead with the escalator tax, without at least giving some thought or consideration to its impact?

Hon. Peter Harder (Government Representative in the Senate): I thank the honourable senator for his question. I want to assure the honourable senator that, in making this decision as part of the budget, the Minister of Finance did review with his officials the effect of the excise tax that is being proposed in this legislation.

He is correct in pointing to its minimal increase. I’m informed that the increase represents 7 cents per bottle of spirits and less than 1 cent per bottle of wine and about 5 cents per case of 24 beers.

I would also point out that Canadian vintners will continue to benefit from a full exemption from the excise duty on wine produced from 100 per cent Canadian grown agricultural products.

The annual inflation adjustments will provide alcohol producers with greater certainty in the future and are in line with the actions taken by many provinces. I daresay, with respect to tobacco, actions taken in the 2014 budget.

Senator Smith: Thank you for your response. Of course, the previous government did implement a tobacco tax. The difference was that there was a five-year review period before any increase took place.

What I would really ask you because we never discussed the implications, not only on a federal level but provincial GST, PST, the whole implication of tax that has a trickledown effect, is: Would you please ask the Minister of Finance, because you mentioned earlier that he did review this, to confirm that no analysis had been done regarding the escalator tax on beer, wine and spirits? While you’re seeking the response, could you please make an inquiry regarding other potential taxes your government is considering with escalation, without proper parliamentary scrutiny or accountability?

Senator Harder: I will, of course, give the honourable senator the assurance that I will raise this with the minister. I would expect that the Senate will raise it with the minister when he appears before the Senate with respect to Bill C-44, which was just introduced.