LDB increases markup on booze as HST lowers tax
There will be no price break for drinkers despite tax reduction of 3%
By Doug Ward, Vancouver Sun May 22, 2010
British Columbians won't be getting a price break on their favourite libations this summer, even though the harmonized sales tax lowers the provincial sales tax on booze.
The provincial Liquor Distribution Branch is ensuring its revenues won't decline by increasing its markup on wines and spirits to offset a three-percent reduction in the sales tax, said Gord Hall, the LDB's corporate policy director. In other words, prices of wine, beer and spirits at provincial liquor stores will remain the same.
"On July 1, British Columbians will see virtually no changes in price when they purchase liquor at a B.C. government liquor store," Hall said in an e-mail.
"Markups are being adjusted to avoid price increases and we expect consumers will only see a difference of plus or minus a few pennies, depending on the product."
Critics say the coming liquor markup undermines the provincial government's argument that the HST will lower retail prices by reducing the tax burden on business.
"I would have liked them to give everybody a break with tax rates being reduced," said lawyer Mark Hicken, whose website, winelaw.ca,covers wine and the law in Canada and B.C.
"It would have been a nice goodwill gesture. Without the markup, prices for wine would have dropped by three per cent," he said.
Asad Masede, a Vancouver web designer, said the government should have passed on the tax cut in the form of a discount for drinkers. Emerging from a liquor store at Harbour Centre, Masede said the HST is good for small businesses, "but for people who are buying stuff, it's not so good.
"Especially these days when the economy is the way it is. People are spending more on alcohol and movies now."
The provincial sales tax on alcohol will go down from the current 10 per cent to seven per cent with the introduction of the HST on July 1.
(The HST, at 12 per cent, comprises the seven-per-cent provincial sales tax plus the five-per-cent federal sales tax.)
But the markup on wine will increase by six per cent, from 117 per cent to 123 per cent. The markup on spirits will jump from 163 per cent to 170 per cent. And the markup on packaged beer will rise from $1.63 per litre to $1.75.
Bill Tieleman, a strategist for the Fight HST petition campaign who writes a blog on wine (winebarbarian. blogspot.com),said that "anybody who needs a drink because of the HST will be sorely disappointed. It's not going to be any cheaper."
Tieleman added that Victoria is claiming businesses will lower retail prices under the HST while refusing itself to lower prices on booze.
"The government can't have it both ways."
Hicken agreed with the LDB that booze prices will be about the same -- even though the markups are higher than the cut in taxes.
Hicken said he did some calculations using the new pricing formula on wine and found that shelf prices won't rise, despite the new markup.
The LDB's markup needs to exceed the sales tax cut of three per cent in order to maintain the same pricing, added Hicken, because the markup is applied to wholesale prices, which are lower than retail prices.
Hicken also questioned whether it's appropriate policy to offset lost tax revenue with revenue from administrative pricing.
Tax revenue is subject to the scrutiny of the legislature, said Hicken, while liquor markups are not. "It's the issue of no taxation without representation."
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