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Big Rock the big winner as Alberta adjusts tax structure for craft breweries

Big Rock the big winner as Alberta adjusts tax structure for craft breweries
Business
As of Sept. 13, Alberta will extend the reduced beer markup that is currently charged to small craft brewers producing less than 50,000 hectolitres to include producers who brew up to 400,000 hectolitres. The reduced rate will be offered on a sliding scale — meaning depending on its size, a brewery could pay anywhere between 10 to 80 cents per litre. After a brewery exceeds the 400,000 hectolitre mark, a flat markup rate of $1.25 per litre will apply.

The move was praised by Big Rock, which — with sales volumes of just over 200,000 hectolitres in 2018 — is too large to benefit from the current tax structure. In May, Big Rock blamed the existing rules, as well as the NDP government’s decision to eliminate a grant program for Alberta-based small brewers in light of ongoing trade and legal challenges, for some of its current financial struggles. The company posted a $1.7-million loss in the first quarter of 2019 (compared to a $387,000 loss during the same period in 2018) and said its resulting cost-cutting measures will include an undisclosed number of workforce reductions.

On Wednesday, Big Rock said the UCP government’s decision to expand the parameters of the graduated markup program will reduce the rate the company pays to $0.64 per litre from $1.25 per litre.

“The Corporation believes the new framework supports sustainable growth of Alberta businesses and the Alberta economy and provides Big Rock’s management the ability to evaluate growth within a predictable regulatory environment,” Big Rock said in a news release.

Big Rock is currently the only brewer in the province that is of a size to benefit from the rule changes, said Mike McNeil, executive director of the Alberta Small Brewers Association. However, he said the government made the right decision as taxing Big Rock at the same rate as major multinationals like Molson Coors was clearly unfair.

“This is totally a positive,” McNeil said.

Alberta’s beer markup system has undergone many changes in recent years. Under former premier Rachel Notley, the NDP government began in 2015 to try to stimulate the growth of the local craft beer sector by hiking the markup on all beers made by producers outside of Alberta, Saskatchewan and British Columbia. But after facing complaints that the changes were a barrier to interprovincial trade, Alberta altered the rules again in 2017 by implementing a flat markup rate of $1.25 per litre on all beer, regardless of where it is produced. A grant program was introduced for small local brewers that essentially offset the higher markup, but that was met by trade and legal challenges and ultimately eliminated.

McNeil said in addition to wanting regulatory certainty, Alberta brewers want to see the government make progress on the interprovincial trade issue. While Alberta has an open market system of privatized liquor stores, other provinces reserve preferential shelf space at government-run liquor stores for their own home-based brewers — making it difficult for Alberta brewers to break into new markets.

The Notley government initiated a trade challenge last year against Ontario over the issue, and consultations between the two provinces are ongoing, said Jerrica Goodwin, spokeswoman for UCP Finance Minister Travis Toews.

“We continue to work towards a positive outcome that will provide Alberta liquor manufacturers with improved access to the Ontario liquor market and we are hopeful we will find a mutually agreeable resolution,” Goodwin said in an email.
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