A harmonized wine tax proposed in Ontario’s 2023 budget is expected to come into effect on July 1. 

The harmonized tax will combine four basic wine tax rates for Ontario and non-Ontario wine sold in off-site winery retail stores, including wine boutiques.   

“It doesn’t affect 90 per cent of the small wineries because we don’t have winery boutiques,” Bill Redelmeier of Southbrook Organic Vineyards told The Lake Report.  

The proposal is a result of a complaint made to the World Trade Organization by Australia in 2018 concerning the sale of wine in Canada.

There is a 9.6 per cent tax on 100 per cent Ontario VQA wine and 22.6 per cent tax on non-Ontario international domestic blended wine sold at off-site boutique stores, Aaron Dobbin, the president of Wine Growers of Ontario, told The Lake Report. 

There is also a 6.1 per cent tax on 100 per cent Ontario VQA wine and a 19.1 per cent levy on non-Ontario international domestic blended wine sold at other off-site locations.

Australia didn’t agree with the difference in tax rates between Ontario and non-Ontario wines.

In May 2021, a settlement was reached between Canada and Australia and part of the deal included the introduction of a harmonized wine tax.

The Ontario budget proposes one rate of 12 per cent across the board.

“We were looking for a different rate but this one is going to impact the government more,” CEO of Grape Growers of Ontario Debbie Zimmerman told The Lake Report. 

According to the Ontario budget, the move will cost the government about $4 million in lost tax revenue.

It raises the tax on VQA Ontario wines, and lowers the tax on non-Ontario wines, like international Canadian blended wines, Redelmeier said.

International Canadian-blended wine is wine manufactured with 75 per cent imported grapes and only 25 per cent Ontario grapes. 

For a major wine operation like Peller Estates, which produces international Canadian-blended wines and has many wine boutiques in Ontario, it’s a gain, Zimmerman said. 

There are 292 off-site winery retail stores across Ontario. 

Zimmerman said it will adversely affect businesses like Château des Charmes, which produces VQA wine and operates two off-site stores. 

“It’s not a win for small wineries,” she said.

Zimmerman said there has been a concern for a while about how the tax structure was going to be harmonized because “our focus is on growing the domestic industry, not growing imports.”

“Giving away something to Australia is never good for us,” she added.