Tax reset for April Fools

In its quest to modernize B.C. liquor laws, the government has announced a new wholesale model that looks much like the old ad valorem tax model, except prices are expected to rise. The new wholesale will include the first of four markups on the landed cost of liquor, under which all retailers (government and private) paying the same base price for liquor.

This is not a flat (get-out-of-the-way of business) tax, as has been repeatedly asked for by the trade, but rather another iteration of the draconian ad valorem tax, or markup as government prefers.

The ad valorem versus flat tax is a no brainer from government’s point of view because it comes with a terrific upside, as it works its magic profiting from every uptick in costs down the road. From exchange rate hikes to insurance, storage, product price hikes no matter what pushes the price higher, they are all whacked by four separate markups that creates windfall profits daily.

Under the system, the BCLDB will apply an 89-per-cent tax on the landed value of any wine priced to $11.75, then a 67-per-cent markup on the remaining value to generate the new monopoly wholesale price. The revenue-neutral ad valorem tax is nothing more than a dart board toss since no one, not even government, has announced what operating markup it will apply to the wholesale tax price before any product goes on retail shelves. Government is suggesting its retail store markup will be set to revenue-neutral, giving an idea how much the wholesale tax is expected to rake in.

The private-sector pricing models I have been looking at suggest prices for wines over $15 will rise as soon as any store operator tacks on an 18-per-cent markup to the wholesale price and 18 per cent is considered very low. Some suggest the retail markup could be as high as 30 per cent in some stores. After that, government steps back in and whacks another 10 per cent PST on that price; then there is tax No. 4, GST, to add another five per cent. As usual, government is not commenting on anything, preferring to make statements such as “The latest changes to B.C.’s liquor policy will offer greater consumer choice and convenience, support small and medium-sized breweries to grow and expand, and ensure fair and equitable wholesale pricing for the retail industry.”

Government has also made a big deal about leveling the playing field but it appears to be tilting the surface in its favour as they prepare to open BC Liquor Stores for longer hours, and on Sundays, and start serving cold beer and wine in selected stores.

Compare that with the original private wine shops that will have their long-negotiated discount model cut in half. If that’s not enough they will not be given beer and spirits to sell like all other retailers, private and government. To ensure field doesn’t become too level, the government has refused to give private retailers the right to sell beer, wine and spirits to restaurants, clubs, golf courses or any other liquor resellers, keeping that perk for its retail stores.

All this started with a reasonable request for a true wholesale price to be made available to restaurants, clubs, golf courses and all other liquor resellers, as it is around the free world. In a province reliant on tourism it makes no sense for resellers spending millions on liquor to be paying the same price as consumers who buy one $10 bottle. The response after months of investigation: there will be no wholesale price for the trade. It defies all logic and it has angered plenty of people who work on one of the most important sectors of the B.C. economy.

John Yap, Parliamentary Secretary for liquor policy reform says: “The changes we’re making to the wholesale price today will enable more competition between retailers to attract British Columbians into their stores and should not force any change in shelf prices.”

So there you have it: a better liquor sector in B.C. is dependent upon private retailers dropping their bottom line to compete against government retailers, whose bosses make all the rules. It’s all coming to a store near you appropriately on April Fools’ Day, unless you decide to start shopping elsewhere such as say, Alberta or Washington.