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Briefing highlights

  • Brewers urge higher pot taxes
  • A song I’d love to hear Sinatra sing
  • Ottawa to buy Trans Mountain
  • Markets at a glance
  • Scotiabank beats forecasts

If you can’t beat ’em, tax ’em

45

Total number of tax increases on beer in Canada since 2010

47 per cent

The average portion of the cost of a case of beer that goes to taxes

50,000

Canadians who have signed on to Beer Canada’s ‘Axe the Beer Tax’ campaign

10 per cent

The per-capita decline in beer sales over the past decade

Those impressive statistics are brought to you by Canada’s brewers. It’s no surprise, then, that they’re fretting over the pending legalization of marijuana, and urging the federal government to make us pay more in taxes.

“In Canada, the potential for legal marijuana to cannibalize beer is much more significant compared to the U.S. because of our higher beer taxes and higher prices,” Beer Canada president Luke Harford told a Commons committee earlier this month, with similar comments to a Senate group.

“The tax on a case of beer in Canada is five times higher than it is in the U.S.,” added Mr. Harford, whose association represents more than 50 brewers.

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“Marijuana taxation rates need to be informed by basic principles of fairness and potential economic impacts, in addition to black market activity.”

And this warning: “The implication is clear. Low cannabis taxes will increase cannabis sales, while high beer taxes will decrease beer sales, leaving the government with less revenue, on balance. We are left asking ourselves, is it worth investing in the Canadian brewing industry today?”

Mr. Harford complained to the committees that the proposed combination of a federal excise duty of 25 cents a gram, and later a 75-cent-a-gram provincial hit, is too low. He used the American experience as an example.

“Evidence from the U.S. indicates that the price of cannabis will fall as larger-volume cannabis producers come on stream and get up to capacity, while industry analysis of the recreational market in Canada also shows that cannabis prices will drop by half with legalization,” Mr. Harford said.

“What is especially noteworthy for us about the U.S. experience is that their marijuana taxes are much higher than their beer taxes,” he added.

“Colorado, Washington and Oregon have all implemented marijuana tax rates that are double and triple the rates they apply to beer.”

As AltaCorp Capital Research sees it, the brewers are right to be worried, noting an average drop in total alcohol sales of 15 per cent in U.S. counties where marijuana was legalized.

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“This would translate to potential lost sales of approximately $3.37-billion in Canada,” AltaCorp analysts warned, basing that number on Statistics Canada’s measure of our alcohol market.

They noted that Mr. Harford’s comments were “the latest in a series of developments and commentary that highlights the concerns of beer and liquor companies regarding the impact of recreational cannabis on their sales.”

Beer, for the record, remains our alcohol beverage choice, worth more than $9-billion in sales in the fiscal year ended March, 2017, the latest measure from Statistics Canada. Beer holds 40.6 per cent of the overall alcohol market, well down from almost 47 per cent in the 2006-07 fiscal year.

Beer’s market share is highest in Nunavut, at 60 per cent, and is lowest in British Columbia, at 34.4 per cent.

And I know what you’re thinking, but British Columbians ranked second for marijuana use, with Nova Scotia at the top.

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A song I’d love to hear Sinatra sing

To think, I did all that

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And may I say, not in a shy way

Oh no, oh no, not me

I did it ... Huawei

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Ottawa to buy Trans Mountain

The Trudeau government is buying Trans Mountain from Kinder Morgan at a cost of $4.5-billion, The Globe and Mail’s Steven Chase reports.

The “agreement will help advance Canada as an energy leader, as a place where good projects get built,” Natural Resources Minister Jim Carr said.

The purchase from owner Kinder Morgan will ensure work can resume on the Trans Mountain pipeline expansion.

“Our government believes that the commercial agreement we have reached with Kinder Morgan is the best way to protect thousands of good, well-paying jobs,” Finance Minister Bill Morneau said.

It comes as the pipeline project faces fierce opposition including the province of British Columbia and environmental groups.

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Markets at a glance

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Scotiabank profit rises

Bank of Nova Scotia posted a stronger second quarter today, saying it’s pleased with its performance so far this year.

Scotiabank profit rose to $2.18-billion, or $1.70 a share, from $2.06-billion or $1.62 a year earlier.

Return on equity held steady at 14.9 per cent.

“We are pleased with our performance over the first half of 2018, with earnings per share up 12 per cent,” chief executive officer Brian Porter said in releasing the numbers.

Loan loss provisions eased to $534-million from $587-million.

Scotiabank’s common equity tier 1 ratio rose to 12 per cent, which Mr. Porter said “supports both further investment and growth of the bank.”

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