‘Ottawa’ Reevely: Ontario’s Vintage Alcohol Regulations have us Subsidizing Liquor Now
Ontario has made such a hash of its policies on locally produced cider and hard liquor that we’re going to start subsidizing them to keep them from collapsing under taxes.
I’ll say that again: Ontario is subsidizing booze. We’re going to pay small cideries 74 cents for each litre of hard apple juice they produce, and small distillers $4.42 for each litre of hard liquor.
Finance Minister Charles Sousa and Agriculture Minister Jeff Leal announced the cash-for-liquor plan at Ontario’s fanciest liquor store, Toronto’s Summerhill LCBO, Tuesday morning. It’s not a lot of money: $4.9 million over three years, spread among about 40 craft distilleries and cidermakers, to a maximum of $220,000 each. But these industries together employ a couple of hundred people, so it’s an amount they’ll notice. A small sort of apology for Ontario’s being such a bad place to do business.
“Ontario’s the worst place in the world to start a craft distillery. How come? Taxation, taxation, taxation,” says Greg Lipin, the owner of Ottawa’s only distillery, North of 7 on St. Laurent Boulevard. The new program is a small step. “It puts us nowhere on an equal footing with beer or wine, but it’s a start.”
Each kind of alcohol has its own rules. Beer has one set, wine another, apple cider a third, hard liquor a fourth. At the moment, the Liberal government likes artisanal alcohol in general: little breweries, wineries, cideries and distillers create jobs in rural areas and boost tourism, they’re hip and they have a dash of back-to-the-land romance. They buy local produce, too: “grain to glass” is the mantra for craft distillers, like “field to table” for locavore cooking. Cideries are really big on Ontario apples.
But the government worries about people drinking too much, so it controls the distribution of alcohol tightly. The government also really likes money, so it taxes the hell out of the stuff.
Microdistilleries are a new (or at least newly revived) industry. Having been around three years, North of 7 is the third-oldest member of the province’s craft distillers’ association, Lipin said. The government doesn’t seem to know what to do with them.
The specific thing that brought us to where we are is a 61.5-per-cent sales tax on hard liquor. Hardly any startup could get a new product out the door, whatever it is, having to pay a 61.5-per-cent tax on it.
Beer and wine are taxed by the litre, like the flat taxes on gasoline. The hard-liquor tax is a percentage: if your product is really good and you can charge more for it, the government gets more. Plus there’s a small per-litre tax anyway, and the usual bottle deposit.
What other alcohol-producing provinces do is charge little to no tax on the first several thousand litres a boozery makes but increase the tax rate as sales rise, so the closer you get to competing with Diageo, the more like Diageo you’re treated. Ontario has a version of that for beer, with a tax regime that distinguishes between microbreweries and macrobreweries. Distillers were expecting their own version in legislation last fall but didn’t get it. The government slightly lowered the tax on liquor sold at distillers’ own counters but the basics stayed in place.
“They gave us an extra $2.50. So on a $40 bottle of gin, before we were seeing $12 of that. Now we’re seeing $14 of that,” Lipin said. “When you only get to keep 20 to 25 per cent of what you’re making, it’s hard to be sustainable.”
Ontario’s new solution: keep the taxes as they are but give money back to the small producers with the subsidies, which might take the distiller’s share up to about $17.
Lipin is hopeful that a government promise to let distillers deliver their products directly to bars and restaurants will make sales easier, so that he can go and offer an owner a sample and maybe sell a case on the spot, rather than making his pitch and then telling the restaurateur to please remember to go to the LCBO and get some. That’s due in the spring.
It’s taken three years to get this much of a concession. Lipin doesn’t expect more changes soon, but maybe after a pause and the next election.
In the meantime, the fledgling industry the government claims to love will work under antique rules that treat corporate distillers that sell bar-rail rye by the truckload the same as ones whose owners pray every day that the latest batch trickling through the still in their rented bay turns out OK.