Excise and the EU (December 21, 2006)

Canadian vintners were bemused by the EU's response to the federal government's excise-cutting initiative to help Ontario and British Columbia's domestic wine industry.

Dan Paszkowski, President of the Canadian Vintners Association in Ottawa, was surprised that the EU has requested consultations over what he regards as a very small measure by the Canadian government. "The value of the excise put in place by the government only applies to 100% Canadian wine. That represents about 5% of domestic retail sales, of which probably half of that would not even compete for shelf space with imported wine because it's sold at the wine gate," says Paszkowski.

The total value of the excise measure for 100% Canadian wine would be about $10 million per year divided among 260 wineries. 75% of Canadian wineries produce less than 100,000 litres per year. On average those producers would benefit by roughly $10,000 a year under the new excise scheme.

In terms of the vast majority of Canadian production – which is a blend of domestic and off-shore wines – the exact same tax measures apply as they do to imported products. According to Paszkowski, 95% of Canadian wine retail sales face exactly the same tax system as wines exported by EU countries.

"The Europeans provide 1.4 billion euros in grape and wine subsidies," says Paszkowski. "They provide significant benefits to their producers in many different forms which ultimately assist European products in entering export markets and giving them the ability to do so at a competitive price. When we provide some type of assistance to a very small portion of our industry – $10 million compared to $2 billion – that is somewhat surprising."

Canadian trade officials have requested the EU several times to reduce the volume of their subsidised exports. Wines from Europe currently account for 71% of Canadian retail value and 60% of sales by volume. "They already have a significant and growing proportion of the Canadian wine market," Paszkowski contends. "Imported wines are growing at a rate of 9% a year over the past decade compared to 5.5% for Canadian wines. Just by virtue of their sales in Canada and the different price points that they sell at, on average they came out of this better than our wines did – even with the excise exemption provided for 100% Canadian wines."