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Low Spirits

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Competition between provincially run liquor stores and LRS stores has been a good thing for beer and wine sales, and it will be good for spirit sales as well, he believes. Besides, LRS stores are Liquor Distribution Customers, too, and unlike provincial stores, they don’t require any taxpayer investment.

In addition to the problem of perception and bureaucracy there’s the problem of taxation.

The spirits industry, although it represents less than 10 per cent of all alcohol purchases in the province, is taxed higher than any other market segment. As a result it accounts for 40 per cent of the provinces tax revenues from alcohol sales.

The price of a bottle of beer is about 50 per cent tax. For a bottle of wine, it’s about 65 per cent. But when you buy a bottle of spirits, a whopping 84 per cent of the purchase price is tax. About 20 per cent of that goes to the federal government, while the remaining 64 per cent goes to the province.

Not only does Spirits Canada see this skew in taxes as unfair, they believe it furthers the perception that spirits are bad – if taxes on alcohol are "sin" taxes, then spirits must be a bigger sin than beer and wine.

It also inflates prices, both at the liquor store and in bars. "If you go out and order a rum and Coke, you’re paying a lot more than you are for a beer, and they have the same amount of alcohol. It’s tough," says Westcott.

The brewing lobby has a lot of power in Canada, and the tax structure is not likely to change any time soon. Meanwhile, the brewers have bigger profit margins than the spirits industry, which means more money to advertise and market their products, and more money to lobby government on matters of sales and distribution.

Between the provinces there is also a tax discrepancy that doesn’t favour the recovery of the spirits industry in B.C. In B.C., alcohol taxes are tied to the retail price of the alcohol, while in Alberta, taxes are tied to volume. It doesn’t make much difference for low-end products, but for premium products the difference is big enough that many B.C.’ers who live near the border choose to buy their alcohol in Alberta. That in turn deprives B.C. of tax revenues.

Although the B.C. government has looked into privatizing Crown corporations like ICBC and the liquor distribution branch, Spirits Canada believes that the owner of an industry is less important than the way it’s run.

"We sell our products around the world, and there are always issues," says Helie. "Everyone has a different system, different taxes, a different bureaucracy. Sometimes the private systems are better, and sometimes the public systems do a great job."

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