19 June 2023
Hon. Ernie Steeves, Minister of Finance
P. O. Box 6000
Fredericton, NB E3B 5H1
Via email: firstname.lastname@example.org
Re: Proposed Tax Increase on Craft Alcohol Producers
Dear Minister Steeves:
We are writing today jointly as chambers of commerce throughout New Brunswick on behalf of our many members in the craft alcohol production industry. We are extremely concerned with the ANBL’s board of director’s recent decision and subsequent announcement that they are abandoning the crown corporation’s 3-Year Local Producer Strategy only one year into the strategy (which was supported by craft producers).
Without proper notice or consultation, this decision appears to be arbitrary and placing a much higher burden on craft producers than the strategy entailed. The strategy states:
Beginning in October 2022, we will implement incremental increases to our markup structure of 2% year over year for the next 10 years across all local categories except ready-to-drink. The goal of having incremental increases instead of one large increase is to help your business adjust over the long term.
Producers agreed to this predictable tax increase plan, but last week, they received a letter from ANBL VP Paul Henderson that stated, in part:
This adjustment to the schedule for rate increases means that the average two percentage points increase for local producers within Micro-breweries, Cider, Wine & Spirts category will go into effect on July 17, 2023. We are making this adjustment to the timing of this increase to coincide with a price increase for domestic beer products which will take effect in July simultaneously. There will be no change for coolers/ready to drink products at this time.
Additionally, the markup structure for local producers will be standardized to a percentage rate instead of a dollar per litre rate to better align with other jurisdictions.
While the change in timing with very little notice is problematic, the change in markup structure is a critical piece here and means that the actual increase in price will be much higher than the planned 2%. According to the industry, craft products in New Brunswick will now see an increase in tax on their products ranging from 25% to 75%. We would be happy to meet at your convenience to further explain how the proposed changes will produce a much higher tax burden on small, local producers than the 2022 strategy intended.
The letter from VP Henderson also states:
…it is still your choice whether you maintain your current case costs, and pass the adjustment on to the customer, or hold your retail prices and adjust your case costs.
Whatever choice producers make – with grossly inadequate notice – will make them less competitive in the marketplace. Essentially, they can either choose to take less money per case from ANBL or have the increase added to their shelf price at ANBL, meaning they will sell fewer products – also affecting their bottom line.
This decision at this time is particularly confusing given that ANBL is in the midst of a review of their local producer policy, including involvement with ANBL Craft Advisory Group, which includes producers themselves. Arguably, the tax structure is the most critical piece of any such strategy and therefore it is our position that any deviation from the 2022 strategy be delayed until that review is complete, to work through the review with industry and other stakeholders, and then propose an accurate, transparent process for implementation of any changes that are recommended.
After years of pandemic, inflation, labour shortages, increasing minimum wage, increasing interest rates and supply chain challenges, this is not the time for a drastic, surprising tax increase that will need to be borne by the producers, the hospitality sector and the New Brunswickers who have chosen to support local products.
The June 2022 tabling of Auditor General Paul Martin’s report regarding ANBL’s role in the development of the province’s liquor industry reinforces our position that ANBL must participate and engage in the development of the liquor industry in the province. We submit that at a minimum this means engaging with industry on major changes in policy such has been proposed by the board of directors of ANBL. The fact that ANBL has already established an advisory group for this exact purpose gives the appearance that ANBL has been doing just that prior to the board of directors’ current interjection into the process.
Krista Ross, CEO, Fredericton Chamber of Commerce
John Wishart, CEO, Chamber of Commerce for Greater Moncton
Vanessa Coggan, Executive Director, Sussex & District Chamber of Commerce
Julia Halbleib, Executive Director, St. Andrews Chamber of Commerce
Anthony Azard, CEO, Cap-Acadie Chamber of Commerce
Cathy Pelletier, Executive Director, Edmundston Region Chamber of Commerce
Annick Robichaud Butland, President, Albert County Chamber of Commerce
Julie Pinette, Director General, Chaleur Chamber of Commerce
Jen Gendron, Hampton Area Chamber of Commerce
Gilles Beaulieu, CEO, Valley Chamber of Commerce
Cheryl McGraw, Directrice Générale, La Chambre de commerce et du tourisme du Grand Caraquet
Gaétane Duval, Chair, Chambre de Commerce Haut-Madawaska
Sheri Somerville, CEO, Atlantic Chamber of Commerce
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