As the Canadian government grapples with balancing public health concerns and economic relief, Prime Minister Justin Trudeau’s recent tax abatement plan offers a surprising boon for the wine and spirits industry. Beer, wine, and RTDs below 7% ABV are among the 'essentials' temporarily exempted from federal sales tax, providing an opportunity for both producers and on-premise establishments.

Canada’s health authorities had advised over a year ago that no amount of alcohol was safe to consume. Apparently, that message has not gotten through to Prime Minister Justin Trudeau.  

In January 2023, a nearly 90-page report from the Canadian Centre on Substance Use and Addiction sponsored by Health Canada advised about a variety of health risks associated with what was previously considered low alcohol consumption. According to the CCSA, any more than two standard drinks - each the equivalent of a 12-ounce (341ml; 0.6 pints) serving of 5% alcohol beer or a five-ounce (142ml; 0.26 pints) glass of 12% alcohol wine - brings an increase in negative outcomes, including breast and colon cancer. 

BBC News noted at the time that it remains “an open question whether Canadians  . . . will be convinced to drink less because of this guidance.” That’s an understatement, and the PM seems to know that.  

Trudeau’s administration and the liberals currently face high unfavorable ratings, which is in part a political backlash that has impacted numerous Covid-pandemic era governments. Incumbents are losing. Trudeau’s most recent strategic move to curry favor with middle-class Canadian voters is a period of zero federal sales tax leading up to and after the holiday season. The tax abatement applies to what Trudeau characterizes as everyday essentials, including baby diapers and most groceries, as well as items like children’s toys and car seats. “Canadians will be able to buy essentials like groceries, snacks, and kids clothing – all tax-free,” said Trudeau’s office.  

The legislature voted in favor of the bill on November 28, 2024, in the House of Commons. Named an Act respecting temporary cost of living relief (affordability), it constitutes a temporary change to the Excise Tax Act. 

Canada’s government sales tax rate is five percent, but Ontario and the Atlantic province pay a harmonized sales tax (HST) of 13 percent. This means that Ontario and Atlantic Canada will save 13 percent on the new items, while the rest of the country will save five percent.

Source: Canadian Press 

Wine, Beer, and the On-Premise will Benefit

What else does it include? Beer, wine, and some RTDs! 

While using the noun “essentials,” Trudeau’s plan will also cover “beer, wine, cider, and pre-mixed alcoholic beverages below 7 percent ABV.” Restaurant meals — both dining in and takeout — are included as well. 

Beer and wine are clearly favored. This could elevate sales during the holidays and the often slow period of January, precisely what the wine industry needs. This tax abatement will, of course, apply to both foreign and Canadian wines.  

The Trudeau Administration and Wine

An oenophile, Trudeau, and his administration have been known to spend lavishly on wine. Earlier this year, the Canadian Taxpayer’s Federation found that “the government spending thousands of dollars on wine tastings and cocktail parties.” Examples included 

- $491.02 to purchase wine for a 2019 event in Ankara, Turkey

- Canada’s Boston consulate recently bought thousands of dollars from Canadian wineries, including Summerhill Estate, Henry of Pelham, and Burrowing Owl Estate Winery

- In Manila, Canadian diplomats spent $4,536.42 on wine for the embassy’s 2023 Canada Day celebrations

- The largest single order came in February 2019 from Washington, D.C., where $56,684 was spent on “wine purchases from special store” 

Perhaps this is a signal, at least from the Prime Minister’s analysts, that the “no alcohol” message, health warning, and total abstention do not lead to Canadian’s hearts. Wine and beer count among the necessities of life and deserve the same tax break as jigsaw puzzles and diapers.  

The law will start on December 14th and be in effect until February 15, 2025. 

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Ideas for Canadian Sommeliers and Wine Directors

Canadian sommeliers can capitalize on the temporary tax abatement by curating promotions that highlight Canadian wines and lower-ABV beverages, taking advantage of the increased affordability to attract customers. This is an ideal time to showcase local wineries such as Summerhill Estate, Jackson-Triggs, Lightfoot & Wolfville, or local wineries, pairing their wines with special prix-fixe menus or themed tasting events that celebrate regional terroir.  

By emphasizing the connection between wine and Canada’s cultural heritage, sommeliers can create compelling narratives that resonate with guests. Additionally, offering takeout-friendly wine pairings for holiday meals or discounted by-the-glass options could drive sales both on-premise and off-premise, ensuring that consumers see wine as a festive yet accessible choice during the tax holiday. 

This temporary measure offers a moment of relief and a chance to elevate the profile of Canadian wines and spirits. As the industry heads into the holidays and beyond, sommeliers and restaurateurs have a unique opportunity to connect with consumers and boost sales during this critical season.

Header Image Source: Reuters

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