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Bulletin Detail
Date April 17, 2010 
Title Harmonized Sales Tax – A Break for Ontario Wine Drinkers? 
Attachment  
Bulletin Untitled Page On July 1, 2010 the new Harmonized Sales Tax (HST) is due to go into effect in Ontario. Several of our wine club Members have asked if this means reduced prices for wines (and other potables) in our Province. This is a reasonable question in that the 12% Retail Sales Tax (RST) currently charged on wine will be reduced to 8% under the new scheme. But, malheuresement as the French would say, there will be no relief for grossly over-charged Ontario tipplers.

Annual Report

To off-set the pending reduction in Provincial sales tax, the LCBO has announced an increase in their mark-ups for wines, beer and spirits. In the case of imported still wine (not produced in Ontario), the mark-up will be increased from 64.0% to 71.5% on July 1st. This mark-up is not simply applied to the price we pay for the wine, but to all shipping costs as well. The mark-up on Ontario produced wines will rise by a like amount, but they still get an unfair advantage at 65.5%.

And why has the LCBO mark-up been increased? To quote from The Honourable Dwight Duncan’s speech on the subject, ‘Cutting Personal and Corporate Taxes and Harmonizing Sales Taxes’(http://www.fin.gov.on.ca/en/publications/2009/fbbb.html):

Replacing Alcohol Fees

The proposed Ontario Tax Plan for More Jobs and Growth Act, 2009 will replace certain alcohol charges with taxes to enhance their operational structure and legislative clarity; these measures will take effect on July 1, 2010.

The proposed rates ... will be set to achieve the following policy objectives:

  • first, to maintain the revenue that will be lost in lowering the 12 per cent and 10 per cent RST rates on alcohol to the Ontario HST rate of eight per cent and to maintain the revenue currently derived from the fees and charges on alcohol products;
  • second, to mirror the current system as closely as possible and to minimize any shifts in revenue from one segment of the market to another;
  • third, to generate no net new revenue for the Province and to minimize any changes to consumer prices; and
  • fourth, to create a structure that will continue to promote social responsibility.

The yellow highlight is mine – I simply have no idea what it means! However, it is clear that the increased LCBO mark-up is a way to maintain tax revenue. Whether it is revenue neutral remains to be seen when we receive the revised LCBO pricing model. One thing you can bet on … in next year’s press release on LCBO operations, the LCBO will crow about the increased “Profit” they have made and turned over to the Ontario government on behalf of the grateful citizenry.

So, what do you as an Arthur’s Cellar Wine Club Member get for this 71.5% LCBO mark-up? Quite frankly, not much. They take your orders that we have assembled for wines we have sourced and marketed and they issue a purchase order to our winery. They also arrange for their shipper to pick up the wine and transport it to Toronto. Then, when it arrives, they lab test it (for which we are charged an additional $175 per test) and release it to us. Finally, they pay the producer from funds we have already given them on your behalf (they also peg the exchange rate against the Euro – averaging more than five full points above the going market rate). These are all functions that we could organize and perform, likely less expensively (except the lab analyses which we feel are entirely unnecessary given the stringent quality regulations in France). They do deliver our wines to Members outside of the GTA, about ten percent of the total – we personally deliver the rest. However, this could be done much more expeditiously via private courier.

In addition to the large mark-up, the LCBO and the Alcohol and Gaming Commission of Ontario (AGCO) impose many cumbersome restrictions on us: we can only sell by the full case; we can only have nine cases of wine in inventory (unless we participate in their onerous consignment program); we must follow their pricing models; we must pay full retail price for samples even though the suppliers volunteer to provide them gratis; only one agent may represent a given winery in all of Ontario, and; so on.

It is a bad deal, but it is the only deal we have under the LCBO monopoly. I just wanted you to know about it. If it annoys you too, let your MPP know and vote for a party that has the courage to do away with this alcoholic anachronism.

Cheers!

Jim and Hélène
www.arthursellers.com
jaswalker@arthursellers.com
hbuisson@ofrance.com