July 27, 2020, Ottawa, ON, — For more than 2 years, Wine Growers Canada (WGC) has been working tirelessly with federal officials to protect the excise duty exemption on 100% Canadian wines implicated in the World Trade Organization (WTO) challenge put forward by Australia against Canadian wine measures. The Australian government was open to a negotiated settlement agreement on all issues, except protection of the Budget 2006 excise exemption.
As part of this agreement, the Government of Canada has agreed to repeal by June 30, 2022, the federal excise duty exemption on 100% Canadian wine as set out in subsection 135(2) of the Excise Act, 2001.
The final agreement will provide 2 years to remove the excise exemption, double the time which would have been made available under a WTO ruling. As part of the settlement discussions with the federal government, WGC made it clear that the Canadian wine industry requires a commitment to an excise exemption replacement program given the financial impacts of losing the excise exemption, greater access to imports under recently negotiated CETA, CPTPP and NAFTA trade agreements, and now the COVID-19 pandemic.
Finance Minister Bill Morneau confirmed with WGC that the Government is prepared to support the wine industry in managing the impacts of this trade challenge, and are actively investigating options that align with Canada’s international trade obligations, with a view to ensuring the long-term success of the industry.
Over the period 2006-2018, the excise exemption has supported investment in more than 400 new wineries and 300 winery modernizations, stimulating 40 million litres of 100% Canadian wine sales growth. The loss of the exemption will impose an excise tax, which since Budget 2017 is now indexed annually to the rate of inflation, adding a new tax burden on every Canadian wine grower. With already slim margins, the excise tax burden threatens the profitability and ultimate survival of wineries across Canada.
WGC and the wine growers across Canada will continue to work with federal Finance Minister Morneau, and federal Agriculture and Agri-Food Minister Bibeau, to develop and implement a permanent, trade legal replacement program in the next federal budget to remove uncertainty and stimulate investment.
For additional information:
Director, Government and Public Affairs
Wine Growers Canada