Beer production tax changes announced earlier this month that would have provided nearly $10 million in savings to Pacific Western Brewing are expected to be amended last Thursday, says Rich Coleman, the provincial minister responsible for liquor.
Coleman said the changes laid out in a Nov. 14 Liquor Distribution Branch memo to domestic beer suppliers were not what he wanted.
The changes were an attempt to ease the tax burden on smaller breweries such as Pacific Western when they expand and move into a higher production category, he said.
Coleman conceded the Nov. 14 changes went too far.
This week, a modified version of the tax changes was announced.
Under the original tax rules, brewers who jumped from one production category to another had to pay a higher mark-up on their entire production. Brewers pay a mark-up tax in various production groups: up to 15,000 hectolitres annually, from 15,000 to 160,000 hectolitres and over 160,000 hectolitres. A hectolitre is about 12 cases of a dozen beer.
Pacific Western Brewing, which produces brands including Canterbury and Pacific Pilsener, is on the verge of moving into the highest production category. The liquor distribution branch was going to blend the lower rate from one production category with the higher rate when production was increased, reducing the tax cost.
The new version of the policy will see the tax mark-up rate increase incrementally between 160,000 and 300,000 hectolitres.
Rates will slide upwards gradually.
The government says seven breweries would benefit from the latest version of the changes.
The first version of the tax change was released a week before Prince George-based Pacific Western was expected to bump into the next highest tax category. That would have forced the company to shut down production by Friday to avoid the $10 million in retroactive tax, Coleman noted.
Beer producers, both large and small, play a large part in B.C.'s economy, with $1.1 billion annually in sales. Most recently, traditional giants like Labatt and Molson have been losing sales to craft and smaller breweries.
But they share in common a practice of employing high-powered lobbyists and contributing generously to the B.C. Liberal Party.
Pacific Western was among the largest contributors, giving $131,000 to the B.C. Liberals in the past decade. Most recently, Pacific Western's owner Kazuko Komatsu donated two tickets to a Bahamas resort for a fundraiser for Coleman.
Coleman dismissed the idea the most recent policy change was linked to Pacific Western's contributions to the B.C. Liberal Party or his fundraising.
He noted the biggest opposition to the transition tax changes has come from larger brewers represented by the National Brewers, which also contributes money to the Liberal party.
B.C.'s biggest brewers contributed less than Pacific Western: Molson gave $61,308 and Labatt donated $65,666.
However, associations that the big brewers belong to (National Brewers) or own (The Beerstore), have contributed more than $200,000 to the Liberals in the past decade. Pacific Western Brewery contributed just over $2,300 to the NDP with donations in 2005 and 2009. The big brewers did not contribute to the NDP.
The National Brewers did not respond to a request for an interview. A 2012 B.C. liquor branch quarterly review shows the volume of beer sales from craft and smaller breweries has increased, while volume at bigger breweries has dropped.
Pacific Western Brewing said in a statement its CEO, Komatsu, was travelling and unavailable for interviews.
B.C. lobbyist Mark Jiles, who has represented Pacific Western in discussions with the government for two years, said the company was happy with the changes introduced earlier this month. Jiles said the original mark-up rules were a disincentive to growing production.
- Gordeon Hoekstra and Kate Bird are reporters with the Vancouver Sun