Okanagan winery passes on tax savings

The BC government has promised the upcoming Harmonized Sales Tax (HST) will help lower prices but it’s becoming clear that not all savings will be passed along to consumers.

While the HST will actually reduce the tax on alcohol in BC by 3%, the BC Liquor Distribution Branch (LDB) will be marking up alcohol prices to offset that tax reduction.

It’s a move one Okanagan winery says isn’t fair to consumers. And because they don’t have to go through the LDB, Laughing Stock Vineyards on the Naramata Bench in the South Okanagan is reducing the price of its wines sold at the winery for July 1st.

“We thought about it and thought, well, as a winery we have that opportunity to pass along that tax saving to the wine consumer,” says Cynthia Enns, who owns Laughing Stock Vineyards with husband David. “Our bottom line doesn’t change so we thought we would do the right thing.”

The current tax rate for wine in BC is 15%, which includes 5% GST and 10% PST. The HST will replace both taxes in BC and become 12%.

While the new tax would have reduced wine prices overall in BC, the LDB recently announced it will increase its wine markup to 123% from 117%.

Okanagan wine merchant Jim Martin calls the liquor branch’s move to increase its mark-up hypocritical.

“That is what the provincial government said, is that small businesses would be passing the savings on to the consumer,” says Martin with Metro Liquor. “But their own agency, the provincial LDB is not doing that. So they should be a leader in that, passing that percentage on to the consumer.”

Wine lawyer Mark Hicken says the government could have easily held its mark-up, as it benefits hugely from alcohol revenue, about $900 million every year.

“I think it would have been a nice goodwill gesture on the government’s part if they had allowed that tax reduction to be passed on to consumers,” says Hicken. “Alcohol taxation rates in British Columbia are staggeringly high and a 3% cut would have been a nice break for consumers to get.”

While wineries can pass on the savings, liquor stores cannot because they buy their wines from the LDB.

Rich Coleman, the BC Minister responsible for the LDB, did respond to interview requests Wednesday.

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