Craft beer tax ruled in violation of national trade deal

A panel has found Alberta’s “discriminatory” tax on craft beer from outside the province violates a national free-trade agreement, and has given the government six months to change policy or file an appeal.

The three-person panel made its decision Friday, ruling that the government of Alberta’s Small Brewers Development Program does not comply with the province’s freetrade obligations under Canada’s Agreement on Internal Trade.

“We are currently reviewing the decision and will have more to say in the coming days,” Mike Brown, spokesman for Finance Minister Joe Ceci, said in response to the ruling.

The province had previously been found to be in violation of the agreement because it solely taxed out-ofprovince craft beer imported from outside the New West Partnership, which includes B.C., Alberta and Saskatchewan.

In July 2016, in response to the ruling, the province made further changes in which it taxed all craft beer at the same rate, but provided Alberta-based brewers with a rebate, which refunded the difference.

Internal government documents filed in court for an upcoming trial between the province and Torontobased Steam Whistle Brewing and Saskatoon’s Great Western Brewing indicate Ceci was advised by provincial bureaucrats on different policy options as avenues to “obtain an additional $85 million in revenue from liquor markups.”

He was provided with four possible options, each detailing the potential revenue and effect on breweries. One option advised to “do nothing until the spring 2016 budget” to “better support small brewers while avoiding the introduction of further markup changes.”

Derek From, staff lawyer for the Canadian Constitution Foundation, which took up the legal fight against the policy, said it appeared the province was just trying to squeeze out-of-province brewers to fill a budget hole.

“When he was given all the policy options, he chose the ones that would raise the highest revenue,” From said.

“He didn’t consider what would be best for the economy, he didn’t consider what was going to diversify the economy or protect local jobs, or comply with the constitution or trade obligations.

“Overnight, literally by email, what the government basically did was make these businesses unprofitable.”

One company the current policy has “completely devastated” is Calgary’s Artisan Ales, which imports artisan beer and joined the Canadian Constitution Foundation in the legal challenge.

Owner Mike Tessier said for the fiscal year ending in November 2016, sales decreased by more than 33 per cent relative to the previous year, and net profits decreased by 86 per cent. “In essence, my business is not going to return from this,” he said.

By going through the panel instead of the courts, Tessier’s business will not be awarded damages, however, the government will have to pay for some of the legal fees.

“It was fought more on principle,” Tessier said. “I feel vindicated in that when I first started the trade appeal, I was right. And now there’s another panel telling me that I’m right, what (the government’s) done is wrong.”

Overnight, what the government basically did was make these businesses unprofitable.