At court on Monday, I was not surprised that Justice Earl Wilson of the Court of Queen’s Bench granted an injunction to Steam Whistle, an Ontario brewery, temporarily preventing the government of Alberta from collecting a discriminatory tax on its beer.
The tax was imposed on Oct. 28, 2015, on all craft beer originating from outside of the New West Partnership trade area (B.C., Alberta and Saskatchewan). Notification of the tax was sent to the affected parties by email a few hours prior at 4:30 p.m. on Oct. 27.
No one should be surprised by Justice Wilson’s decision — there is an important constitutional issue to be settled with regards to this tax. Since 1867, Canada’s Constitution has prohibited any Canadian government from imposing protectionist taxes, tariffs and the like inhibiting the free flow of “articles of growth, produce, or manufacture” between provinces. Alberta’s protectionist beer tax runs afoul of this.
I have been writing about this constitutional provision in relation to liquor laws in the national media since 2011. If you read the Calgary Herald or Financial Post, you may have noticed. Of course, it’s not just me. My colleague, Marni Soupcoff, has been doing the same for nearly the same period of time.
Add to this that during August 2015, a New Brunswick trial became the focus of the national media. Defendant Gerard Comeau had been fined for transporting liquor in excess of the personal exemption limit from Quebec to his home in New Brunswick. Partnering with lawyers Ian Blue and Arnold Schwisberg, the Canadian Constitution Foundation supported Comeau’s defence since the New Brunswick’s personal exemption limits violate the same free trade clause.
Stephen Harper, then our prime minister, expressed his dismay that such an impediment to the free flow of goods between the provinces existed. On the campaign trail, Liberal party Leader Justin Trudeau expressed much the same opinion. Further, each of the major editorial boards throughout Canada expressed their support for Comeau.
So how is it that Alberta’s new government did not realize that imposing a protectionist tax on beer from outside of the New West Partnership is unconstitutional?
Finance Minister Joe Ceci defended his plan to charge a higher mark-up on beer from outside of the New West Partnership in late November. “Our intent is to grow the brewery business in Alberta and to create jobs and to diversify the economy,” he told the CBC. Unfortunately for Ceci, intent doesn’t enter into it. But even if it did, it’s a bad argument.
In Steam Whistle’s pleadings on Monday, the court heard that four full-time and 15 part-time Alberta employees will lose their jobs on account of Ceci’s plan to create jobs and diversify the economy. Further, Muskoka Brewery ceased operations in Alberta at the end of 2015 on account of this tax, leaving even more Albertans without work. So far, Ceci’s plan has only cost jobs and hurt the economy.
Perhaps Alberta’s government was given bad advice. Rumours have been floating around in the media that Ontario imposes similar taxes on Alberta craft brewers’ products. In fact, the crown’s lawyers argued as much opposing Steam Whistle’s injunction. But this claim is false. And all you need to do is talk to the LCBO to get the facts straight.
Ontario does not impose a protectionist tax on beer. Regardless of where you brew your beer in Canada, or the rest of the world, you will pay the same fees as an Ontario brewer does if you want your product available in Ontario. Do Ontario brewers enjoy other advantages? Yes, they do. But the salient point is that Ontario imposes no tax similar to Alberta’s protectionist tax.
So what’s next for Alberta’s protectionist beer tax? In the near future, the Alberta courts will be asked to consider in depth whether Ceci’s job creation plan violates the constitutional rights of Canadians to live in a country free from job-destroying trade barriers. There is a good chance that the government of Alberta will lose in the courts of law and public opinion.
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