Some Canadian winemakers say new federal program eases sting of 4% tax's return

Although Canadian wine prices are rising four per cent due to the recent return of a federal tax on domestic brands, some winemakers say they're buoyed by a new program designed to help people in the industry.

The government program may even mean consumers won't face an immediate rise in wine prices, says Tom O'Brien, owner of Cooper's Hawk Vineyards near Harrow, Ont.

Effective July 1, Ottawa repealed the excise duty exemption on Canadian wines after resolving a trade dispute with Australia. 

In response, Agriculture Canada has a new support program that provides short-term financial help for struggling wineries, with a compensation package based on a winery's production in litres for the previous year.

O'Brien said the new program isn't a rebate — wineries will still have to pay the excise tax — but rather, "it is a subsidy to producers."

"What most people don't get is you can go to the LCBO and buy an imported wine for $10. The reality is the LCBO is paying for that $3.50. Because of the labour costs and marketing boards, we can't even make wine for $3.50, let alone a whole bottle."

• LISTEN | Winemaker Tom O'Brien speaks on the impact of excise duty exemption repeal: 

According to O'Brien, the new program may mean the consumer won't have to pay more — at least not yet. 

"I do feel confident that at least for the next two years, [the program is] going to recoup our costs," he said.

"I would think that the expectation is that there will be no cost passed through to the consumer quite yet, not until we have to absorb the 51-cents-per-bottle excise tax."

Applications for the first phase of the program opened Monday and will last for six weeks. Under it, $166.2 million ($83.2 million in 2022-2023 and $83 million in 2023-2024) is being made available for wineries.

Wineries that generate under $50,000 in sales of packaged wine are exempt from paying the excise duty tax and aren't eligible to apply for the Agriculture Canada program, which is set to end on March 31, 2024.

A spokesperson for Agriculture and Agri-Food Minister Marie Claude-Bibeau said in an email to CBC that two wineries have already submitted applications for the new support program. Currently, there's no plan for the program post-2024, she added.

According to Agriculture and Agri-Food Canada (AAFC)'s website, it has provided about $14.2 million in support towards market development and research for the Canadian wine industry since 2016. There are about 800 licensed wineries in the country, with the majority in British Columbia, Ontario, Quebec and Nova Scotia, and employment in the industry has grown by about 70 per cent between 2015 and 2020, to about 8,500 employees, it adds. 

The AAFC also says manufacturing sales went from $1.1 billion in 2015 to $2.1 billion in 2021.

Rob Taylor is director of policy and government relations with Wine Growers Canada (WGC), with members including provincial industry associations, international industry associations and liquor boards. 

Taylor said Canada produces one per cent of the world's wine, and has the eighth-largest wine sales market by volume and the fifth largest by value.

The WGC recognizes the competition domestic producers face with overseas producers, said Taylor.

"They can't produce wine for the prices that import wines are sold for in Canada," he said.

Governments actually know now that when you produce wine, you've got a huge amount of jobs available in the industry and they see now that it's a big economic driver.- Rob Taylor, Wine Growers Canada

"We were very happy last week when the federal government announced the new ... wine-sector support program, which will address a number of these challenges," said Taylor. "The excise tax couldn't have come at a worse time, but it is one of many different factors that are impacting the wine industry."

O'Brien hopes Ottawa will offer similar help to other wine-producing countries.

"In all the major wine-producing countries in the world — France, Australia, New Zealand — there are huge subsidies and help given to the agriculture industry," he said.

"Governments actually know now that when you produce wine, you've got a huge amount of jobs available in the industry and they see now that it's a big economic driver."

Taylor calls wine "the highest value-added agricultural product in Canada."

"Nothing comes close to returning the economic benefits than the production of wine."