Ontario’s booze policies lurch from tax to subsidy

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 Toronto’s Summerhill LCBO, Tuesday. 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 several hundred people, so it’s an amount they’ll notice.

“Ontario’s the worst place in the world to start a craft distillery. How come? Taxation, taxation, taxation,” says Greg Lipin, owner of Ottawa’s only distillery, North of 7. The new program “puts us nowhere on an equal footing with beer or wine, but it’s a start.”

Each kind of alcohol — beer, wine, apple cider, hard liquor — has its own rules. At the moment, the Liberal government likes artisanal alcohol: 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.

But the government worries about people drinking too much, so it controls distribution tightly. The government also really likes money, so it taxes the hell out of the stuff.

Micro-distilleries 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, having to pay a 61.5 per cent tax on it.

Beer and wine are taxed by the litre. The hard-liquor tax is a percentage: if your product is good and you can charge more for it, the government gets more. Plus there’s a small per-litre tax, and the usual bottle deposit.

Other alcohol-producing provinces charge little to no tax on the first several thousand litres a boozery makes, but increase the tax rate as sales rise. Ontario has a version of that for beer. 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.

“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 hopes a government promise to let distillers deliver their products directly to bars and restaurants will make sales easier, so he can offer an owner a sample and maybe sell a case on the spot, rather than telling the restaurateur 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.