Small brewers tax cut

Cass · Post by **Cass** » Fri Mar 28, 2003 4:42 pm

Issued on the wires today....

Attention News/Business/Financial Editors:

Ontario Small Brewers Association applauds Ontario Budget

- New tax structure will benefit microbreweries, an Ontario growth
industry

TORONTO, March 28 /CNW/ - The Ontario Small Brewers Association (OSBA)
says "thank you" to the Ontario government for a new tax cut announced
yesterday in the Ontario budget. This measure, effective May 26, 2003, will
encourage the continued development of an Ontario growth industry, the
province's microbreweries.
There are currently 33 small brewers throughout Ontario, from Neustadt to
Nobleton, Creemore to Carleton Place, and Niagara Falls to Windsor. In many
communities, the brewery is the anchor business, creating jobs and attracting
tourists and investment dollars far larger than their size would suggest. In
the past 15 years, this sector has grown from zero to nearly 500 jobs and
boasts sales revenues in the $100 million range. Many of Ontario's
microbrewers have won international awards for the quality of their beers,
helping put Canada on the map in the premium beer category.

The tax situation

Ontario's small brewers pay taxes of over $20 million and, despite their
success as microbrewers, operate on very tight and often negative margins.
The competition from imports and others has significantly raised the cost of
remaining competitive. Until the tax cut announced yesterday, Ontario's tax
rates were far higher than Quebec's and Alberta's. As of May 26, 2003, the
rates will be much more competitive.
It's been proven in Quebec and Alberta that lowering tax rates results in
significant growth and prosperity for small brewers.
Ontario's small brewers have been working closely with the Ontario
government, in particular the Ministry of Consumer and Business Services and
its agency, the LCBO, on these changes and on future developments to increase
their presence and success.
"It is great to see the Ontario government invest in Ontario's small
brewers and local job creation in our province," says Howard Thompson, CEO,
Creemore Springs Brewery, and Chair, OSBA. "The tax cut announced in
yesterday's budget makes a strong statement that the Ontario government is
committed to showcasing premium beer made right here in Ontario. It's also
recognition that Ontario's small brewers not only make world class beer, but
are one of the successful and thriving industries in our province."
The new tax incentives are expected to lead to creation of 350-plus jobs
over the next five years in local Ontario communities. OSBA is estimating an
economic impact of $68 million, resulting from increased job creation, tourism
and related local purchases.

-30-

PRMason · Post by **PRMason** » Fri Mar 28, 2003 5:12 pm

This tax cut is a terrific boost for the industry and the government is to be applauded for their efforts.
This step will enable most micro's, who have been operating on a very narrow margin (if any at all!) to turn the corner toward profitability. Please be kind to us...please don't demand that the price of our beers go down because of this tax break. We honestly need the money to survive,grow and prosper in this extremely competitive industry.
Thanks,
Perry

Uncle Bobby · Post by **Uncle Bobby** » Fri Mar 28, 2003 7:19 pm

I think this would be a tremendous boost to brewers. A much desired and a much deserved change. However I would like to offer some notes of caution.

The provincial government does not generally release a Notice of Ways and Means Motions with their budget, so unlike Federal Budgets, we do not know the specific legislative changes that they are proposing. Ontario provincial budget announcements are little more than policy statements -- nothing changes until they actually make specific statutory amendments. I am not familiar with the specific taxes to which brewers are subject in Ontario, although I'm certain our brewer friends here are painfully familiar. However a marginal change in rates is not going to change the world for these guys.

Now is the time to lobby your area MPP's and use this commitment to make the changes as favourable as possible. Comments or suggestions can be made to Janet Ecker, the Minister of Finance, at:
Phone: 416-325-0400
Address:
Hon. Janet Ecker
Minister of Finance - THE EXECUTIVE COUNCIL OF ONTARIO
Frost Bldg S
7th Flr
7 Queen's Park Cres
Toronto, ON M7A 1Y7
OR to your area Tory MPP.

And as this is likely a pre-election budget, and therefore never likely to be drafted into legislation or enacted, let opposition MPP's know about how much you like this proposal, too. Also mention to any candidates who may turn up at your door, if and when a campaign gets underway. Hopefully the next government, whichever party manages to form it, will follow through on this timely and much desired change.

Of course an more effective initiative might be for the provincial goverment to start enforcing their own laws, and prevent the big breweries from slinging free kegs to bar owners. A tax reduction is good, but a level playing field might be even better. Or how about dealing with the ham-handed treatment of small-brewers by Brewer's Retail and the provincial liquor monopoly? There a number of more effective initiatives they could undertake if they were serious about allowing the small brewers to thrive rather than simply survive.

<font size=-1>[ This Message was edited by: Uncle Bobby on 2003-03-28 19:31 ]</font>

PRMason · Post by **PRMason** » Sat Mar 29, 2003 10:34 am

The tax break takes effect on May 26, 2003. The impact will be very beneficial. For example, a micro producing and bottling 5000 hl per year will see an addtional $25,000 on their bottom line. At the upper end of micro land, $75,000.00 + will be realised. This could mean that some micro can turn the corner into profitability. Most of us brew it for love. In my case, I would get paid more if I had a paper route! This initiative will give us a much needed boost!

Asst. Grain Shoveller · Sat Mar 29, 2003 11:07 am

The tax break is the result of all of us Ontario
microbrewers doing some very serious lobbying. It is very difficult for us to survive in this province and this tax reduction will be used to help all of us grow and put more great local Ontario beer onto the market.
This was lead by the OSBA (Ontario Small Brewers Association)chaired by Howard of Creemore. Currently there are 11 member breweries and Gary & I are working on getting more members to join.
(My first post would have to be something politcial!!!!)

Uncle Bobby · Post by **Uncle Bobby** » Wed Apr 09, 2003 11:59 am

For fear of making another gaff, below are the related sections from the Ontario Budget Papers.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
BEER AND WINE
Microbreweries
Small brewers promote tourism and community and rural development. To encourage the growth and development of Ontario’s microbrewery sector, the fees levied by the Alcohol and Gaming Commission of Ontario will be adjusted effective May 26, 2003.

A microbrewery would be defined, on or after May 26, 2003, as a manufacturer of beer whose
annual worldwide production over the last five years averages 150,000 hectolitres or less.
The microbrewery reduction rates and thresholds are proposed to change according to the following schedule:
œ 5.11 cents per litre for regular beer and 3.61 cents per litre for draught on the first 15,000 hectolitres of beer shipped in Ontario on or after May 26, 2003;
œ 12.76 cents per litre for regular beer and 9.01 cents per litre for draught on the next 15,000 hectolitres of beer shipped in Ontario on or after May 26, 2003;
œ 25.53 cents per litre for regular beer and 18.03 cents per litre for draught on the next 20,000 hectolitres of beer shipped in Ontario on or after May 26, 2003;
œ 38.29 cents per litre for regular beer and 27.04 cents per litre for draught on the next 25,000 hectolitres of beer shipped in Ontario on or after May 26, 2003;
œ 45.95 cents per litre for regular beer and 32.45 cents per litre for draught on the next 75,000 hectolitres, up to 150,000 hectolitres of beer shipped in Ontario on or after May 26, 2003; and
œ 51.05 cents per litre for regular beer and 36.05 cents per litre for draught when over 150,000 hectolitres of beer is shipped in Ontario on or after May 26, 2003.

Regular beer is beer shipped in containers with a capacity of less than 18 litres. Draught beer is beer shipped in containers with a capacity equal to or greater than 18 litres.

Beer Products Sold in the Liquor Control Board of Ontario (LCBO)
To ensure consistent treatment of all beer products sold in the LCBO, the accounting system for revenue from domestic beer products will be amended to mirror that of imported beer products.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
[Uncle Bobby says:]
From the PRMason's assessment of the benefits of the cut, it seems that you guys are getting a very reasonable deal.

To clarify my mistake, these reductions will take effect May 26th, 60 days after their introduction in the Budget. The "taxes" are in fact levied as a "fee", so the rates are part of a schedule in regulations, and can be changed by an Order in Council (i.e. the Cabinet). The Legislature does not have to reconvene to pass these measures.

Congratulations to the members of the OSBA and to Howard on this pay-off for his hard work.

Josh Oakes · Post by **Josh Oakes** » Wed Apr 09, 2003 4:41 pm

Good show. Next stop, the illegal blackmailing by licensees seeking free kegs in return for a tap handle. All they have to do is enforce it, and it will do micros a world of good in terms of levelling the playing field.

Maudite · Post by **Maudite** » Thu Apr 10, 2003 12:47 am

Josh, I agree with you. In this day and age I was told there is a certain brewery who flips Mainstream tap handles for a specific brand of beer. Based on small quantities from a large brewery standpoint. (Licensees have told me they will not receive a visit from a mainstream rep unless they push 5-8 kegs a week of their brands). This makes it much easier for a certain brewery to ship out un-marked kegs to a licensee for a specific price. Everyone thinks they drink a specific brand for the playoffs when in fact they receive something else. This way the licensee markets mainstream and everyone buys into it for a fraction of the price. Given the fact everyone drinks from a certain tap handle. Anyhow, had a 6pack of that damn "Black Oak Pale ale" damn you Ken! Enjoy! Maudite.

PRMason · Post by **PRMason** » Thu Apr 10, 2003 6:22 am

This "black-tapping" goes on quite a lot. There are several non-mainstream breweries that participate in this activity. Its not hard to figure out who they are. Look at Stepehen Beaumont's "Great Canadian Beer Guide". You'll see some breweries listed that you've probably never seen on tap. How do they sell they're beer....
I went into a licensee in Ottawa who had 6 taps, all mainstream. I managed to get a glimpse at his beer fridge, and lo and behold, all he had on tap was 6 kegs of one beer! To make matters worse, none of the taps were this brand.
This kind of behaviour is deceitful, not to mention illegal. It dosen't impact on my business because these places probably wouldn't do business with me anyway, but thats not the point is it.