LCBO: High Prices Are Good Social Policy

Artisanal distillers in BC are growing like wildfire, but distillers all over the country are facing issues with the burdensome regulations that are being placed on them. Even with the growth of the distilleries, their products are not often found on the shelves of liqour stores in the country. If they do want to get their products onto the shelves, then the distilleries are required to pay a wholesale and retail markup that equates to roughly 167 per cent, and this translates into a return to the producer of roughly $15 per bottle. The plethora of regulations surrounding the market turns into less options on the shelves for consumers.

One Toronto distillery is saying that Ontario taxes it collects are unconstitutional, based on the allegation that the rules were never voted on. They have claimed that these taxes involved with the regulation surrounding the distilleries, is unconstitutional under section 53 of the Constitution Act of 1867 and they say that it amounts to taxation without representation. They claim that the LCBO is forcing the distillery to remit a mark-up that is a tax, without any basis in legislation or regulation. “In our case the respondents cannot point to any statutory law or regulation directing payment of the mark-up,” said Charles Benoit, a lawyer and Ottawa native.

There are roughly 50 distilleries that are operating and licensed today in the country, which is thanks to government legislation from 2013 which allowed these businesses to open tasting rooms and be able to sell directly to the public. , things aren’t easy for those who are looking to break out into the market. With legislated production limits of 100,000 liters per year, it makes it difficult for the distilleries to grow with the business and expand further. Representatives from the local distilling industry, along with Liquor Distribution Branch and MLA members, are looking to discuss the possibility of higher production limits and relaxing the markup. “That would allow us to make at least a small profit and be on the store shelves, which is great advertising and would give us a lot of legitimacy,” says Tyler Dyck who is said to have started the province’s distilling renaissance in 2003.

Ontario has argued in court documents that the reason they impose the strict markup on hard liquor in the country, is because it “reduces the social costs of excessive consumption by avoiding the proliferation of points of sale, restricting the availability of cheap liquor.” The Alcohol and Gaming Commission of Ontario has said that Ontario is not taxing the liquor, but that provincial law requires producers to sell all their alcohol to the province who is then the only designated seller to the public market. The LCBO believes that higher prices for spirits are just good social policy.

These types of regulations might give us some insight as to how cannabis would be treated if it was sold through liquor stores.