- Written by Mark Hicken Mark Hicken
- Category: Latest News Latest News
- Published: 27 August 2011 27 August 2011
BC's vote to scrap the HST will affect the wine industry in a number of ways. Here are some of the most obvious changes based on the government's promise to return things to the "way they were".
Taxes. The reintroduction of the PST will mean a return to the old special PST rate on alcohol of 10% (along with the 5% GST). When the HST was introduced (5% federal part, 7% provincial part), there should have been a reduction in the price of wine but the government did not pass those savings on and ordered the LDB to increase markups to compensate so the shelf price would "remain the same" (on wine, the markup went up from 117% to 123%). So, in order to go back, the LDB will have to reduce their markups to the old rates which means that agents and the LDB will have to reprice everything.
Retail Pricing. Retail prices on wine, for the most part, should stay the same. On imported wine, there should be no end change for consumers. However, BC wine that is sold through the direct delivery channel is exempt from liquor board markups. The tax levels on that wine actually went down with the HST from 15% to 12% (only a few wineries, such as Laughing Stock passed on those savings to consumers). With the shift back to the PST/GST, the taxes will go back up, which will likely mean that wineries will either absorb the 3% or increase prices slightly to compensate.
Restaurants, Bars and Hotels. The tax on the food portion of restaurant meals will go down from 12% to 5% as only the GST will apply. However, the tax on alcohol on a customer's bill will go up from 12% to 15%. Restaurants will get their "licensee discount" back from the LDB, which covers off the 10% PST portion when they buy wine at wholesale. Restaurants will have to re-price their alcohol if they wish to maintain constant profit margins