The future for Ontario cider production and consumption: Assessment of Ontario's excise tax regime

Abstract

AbstractA competitive tax rate is necessary for products aiming to grow their market share, yet little is known about the cider beverage competitive tax landscape in the Province of Ontario, Canada. This report argues for the adoption of the similar tax treatment of Ontario beer towards Ontario cider. The purpose of assessing current cider tax treatment within Canada is to address the growing concern from local cider producers on this commodity's taxes. An analysis of current trends within the cider market, particularly concerning consumption and trade data, is examined for Canada, the United States, Belgium, France, Denmark, Netherlands, and the United Kingdom. In addition, an overview of consumption trends within Europe is assessed. The tax treatment between European alcoholic beverages is compared, with France charging lower tax on Cider than beer to the Netherlands charging over six times the rate on cider at 1.33 CAD/L. In contrast, the United States charges only 0.06 CAD/L on cider versus 0.04 CAD/L on beer. Canada charges 0.32 CAD/L on Cider and 0.24 CAD/L on beer. The findings from Europe's cider analysis suggest restructuring and lowering Ontario's taxation on cider's local production and the multiplier effect on the provincial and national economy. Sensitivity analyses demonstrate a minor decline in the tax rate would generate significantly more tax revenue to the government and, at a 2.4‐time multiplier, a positive effect economic impact of between 14 million and 28 million CAD while generating direct tax to the government of between 278,647 CAD and 479,274 CAD. Recommendations are provided for the Ontario government to implement a tax rate that favors both the government and local farmers and local processors.