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Tax hike blamed for Canadian spirits decline

Canadian spirits exports declined by 5.1% to CA$674.7 million (US$540m) in 2017, according to new data released by Statistics Canada.

Canadian spirits exports fell by 5% last year

Despite the drop, spirits accounted for 68% of the total value of all Canadian beverage alcohol exports last year, far surpassing the combined value of beer, cider and wine exports.

Canadian whisky accounted for CA$365m of the total value of Canadian spirits exports, followed by liqueurs at CA$155m. The remained was comprised by vodka, gin, rum and grain neutral spirits.

Spirits Canada, the national trade association representing the interests of Canadian spirits producers, believes that a 2% tax hike on beer, wine and spirits last year is to blame for the decline.

“The March 2017 Federal Budget that increased Canadian liquor excise duties immediately by 2% to 7.8% on Canadian whisky and other Canadian alcohol products, with automatic annual increases every year thereafter, had a negative impact as manufacturers and brand owners sought to reduce costs and throttled back on their investments domestically and internationally,” said Jan Westcott, Spirits Canada president and CEO.

“While Canadian excise duties are not charged on products exported outside of Canada, the hike in taxes in our home market has already begun to further erode the competitiveness of Canadian spirits manufacturers, a decline we fear will only accelerate in 2018 with the cut in spirits excise duties by the US earlier this year.”

“Canada urgently needs liquor excise duty reform and an elimination of the damaging annual ‘escalator tax’ to bring fairness to Canadian whisky makers and we hope minister Morneau [Canada’s minister of finance] will address this issue in his upcoming budget.”

Spirits spending is expected to increase in Canada over the next two years to reach CA$26.6 billion (US$20.4bn) by 2020, according to recent forecasts from BMI Research.

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