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Federal Excise Tax Exemption & Certain Provincial Preferences for Canadian Wine To Be Eliminated

A press release from Global Affairs Canada issued today (Summary of Understanding Between Australia and Canada on Wine) indicates that the federal excise tax exemption for Canadian wine will be eliminated within 2 years. This action comes in partial settlement of a trade dispute launched by Australia against Canada at the WTO which alleged that various Canadian policies and practices were discriminatory against Australian wine and violated GATT rules. 

The practical result of this will be that all Canadian wine (including BC wine) will eventually become subject to federal excise tax (currently levied at a rate of 66.5 cents per litre or just under 50 cents per 750 ml bottle). Prior to this settlement, 100% Canadian wines have been exempt from this tax. The elimination of the tax exemption can reasonably be expected to increase the price of Canadian wines in the marketplace for the end-consumer once it is implemented (i.e. within 2 years).

The progress of this WTO dispute DS537 can be tracked here: Canada – Measures Governing the Sale of Wine. As can be seen here, the WTO Panel is scheduled to issue its Final Report on the dispute in the middle of August. However, this settlement will resolve part of the complaint. It should be noted that the settlement states that it does not \”alter Australia\’s claims with respect to other measures covered by DS537\” (i.e. the other matters covered by the dispute). 

In addition, and as a related part of the settlement, it appears that Nova Scotia and Ontario have also agreed to change certain preferential provincial practices over the next few years such that Australian and Canadian wines will eventually receive similar tax and distribution treatment. Nova Scotia has agreed to eliminate its preferential liquor markup policies for local wines. Ontario has agreed to eliminate preferential rules in both its grocery channel and taxation treatment of Australian wine. Media coverage from Australia also discusses the settlement: Winemakers Cheer Wins Over Canada\’s Trade Barriers.


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