Gary's Corner: The Cost of Wine

By Gary Hewitt, DipWSET, CWE, FWS, SWS, Sommelier

The Manitoba Liquor Control Commission (MLCC) was established in 1923 in an environment rife with temperance. The Government Liquor Control Act, 1923, with Amendments 1924, was keenly focussed on the control and regulation of liquor distribution and sales. Among the basic powers granted to the MLCC was the ability to set liquor prices. As time passed, hefty taxation became justified to provide funds to offset the health and societal costs incurred from alcohol consumption. In more recent times, the mandate expanded to include funding for education, social services, housing, and infrastructure. In this context, the levy is a “societal” or “sin” tax and even a “corrective tax” designed to limit liquor consumption.

As a society, we have agreed to place high taxes on liquor. The major Manitoba Liquor & Lotteries (MBLL) markup (they refrain from calling it a tax) is a straight percentage markup on all products within a category. Several other markups of lower impact are also added, and PST and GST are added at the till. In my 22 years as a wine buyer, there have been no significant or lasting changes to this liquor taxation strategy in Manitoba.

In Manitoba, markups vary with the category of beverage—beer, wine, and spirits being the big three. All wines, for example, are subject to a 95% provincial markup applied to the total of the purchase price paid to the supplier, transportation costs, and federal excise tax and duty. The markup applies whether these costs total $5 or $50 per bottle: the markup adds $4.70 to the $5 bottle and $47.50 to the $50 bottle. The amount of markup grows proportionally with the price of the wine, turning many moderately priced wines into luxury products, exclusive to the wealthy.

The MBLL has the ability to modify the taxation structure and still generate the same revenues. To

cite Alberta as an example, a fixed provincial tax of $3.91 per litre is applied no matter how much the wine costs. The Alberta tax on the $5 and $50 bottles in our example would add a mere $2.93 per bottle in both instances. This massively reduces the surcharge on the more expensive wine. Other jurisdictions apply a basic markup up to a certain cost, and then a lower rate (or rates) as costs increase. Both alternatives place greater emphasis on taxing the volume of alcohol (the original and insinuated ongoing purpose of the regulations) and less emphasis on taxing the cost of the wine.

Why does this matter? There are several reasons. One, Manitobans eager to explore today’s diverse wine world or collect wines face a punitive luxury tax. Two, because specialty and fine wines are unduly expensive, “affordable” mass-produced products tilt the market towards boring homogeneity. And three, wine-destination restaurants lack access to a greater diversity of wines from which to create great wine lists. Manitoba restaurants are further penalized because they generally pay full retail for wine rather than receiving a wholesale price. As a result, wine lists may appear expensive when, in fact, Manitoba restaurant markups are in line with or, in many cases, even lower than other jurisdictions.

As a wine lover, I would be delighted to see an adjusted taxation system that makes “interesting” wines more accessible. As a restaurant patron, I would love to see more diverse and more affordable wine lists. Granted, tax reform can be contentious because of the many vested interests, but the potential to support a hospitality industry that often works on razor-thin margins makes reform worthwhile. Imagine creative taxation that reduces restaurant wine costs so that Winnipeg and Manitoba cultivate a restaurant wine culture that attracts tourism. Now wouldn’t that be a pretty picture for our hospitality future? �