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Storm brewing over change to beer tax policy

It defies belief that a mandarin in the B.C. Liquor Distribution Branch would go rogue and independently issue an edict that affected the provincial treasury and had dangerous political implications for the government.

And yet that is what Rich Coleman, minister responsible for liquor policy in the province, wants us to believe about a change announced recently by the branch that would greatly assist Pacific Western Brewery, an independent owned by staunch Liberal Party supporter Kazuko Komatsu.

Mr. Coleman had to explain himself this week to members of his caucus because of concerns they had about the horrendous optics of the deal. Many of their worries continue to exist.

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Pacific Western hired Liberal insider Patrick Kinsella and his partner, Mark Jiles, to lobby for precisely the change the LDB announced. Making appearances worse, the policy move was announced a week after Ms. Komatsu made an in-kind gift donation valued at nearly $27,000 for use as an auction item at a fundraiser Mr. Coleman held in his riding.

When it learned of the tax change that gave Pacific Western an advantage in the marketplace, the National Breweries Association was justifiably upset. The beer business is competitive. And the new LDB mark-up code scheme was going to allow Pacific Western to produce suds cheaper than the big boys.

How much cheaper? If, for instance, the company decided to pursue stated goals to increase annual output by 40,000 hectolitres, it would pay nearly $10-million less a year in taxes than it would have otherwise.

Mr. Coleman's contention that Pacific Western is going to have to lay off workers unless it gets the changes entirely lacks context. The fact is, the company has been doing fine in recent years and bragging about the profits it has been making. There haven't been any stories about layoffs and hard times – just the opposite. In fact, it had successfully lobbied the government for incremental increases in its production capacity while not affecting the mid-level tax rate it enjoys.

That cap now sits at 160,000 hectolitres. If the company produced one more mug of beer beyond that this year, it would have to pay the highest tax rate on its entire production. Naturally it didn't want to do that, so it allegedly threatened to close up shop until it had a new year to work with. Although why it would suddenly start laying off workers now remains a mystery.

What appears to have taken place is, a compromise was reached that would allow the company to be dinged with a gradually higher tax rate up to 400,000 hectolitres, at which point it would be paying top rate. The language of the policy change appeared to be written so only Pacific Western could take advantage of it – at least in the short term.

Of course, the public will likely never know what really happened here. The LDB is in complete lockdown mode and all questions regarding this matter are referred to Mr. Coleman's office. Mr. Coleman is saying it was all one big mistake and is hanging it all on defenceless bureaucrats in the LDB. Anyone who knows anything isn't talking and doesn't have to, apparently.

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Even though changes to the liquor mark-up imposed by government affects the treasury, they apparently don't have to be approved by cabinet or treasury board. But as one government insider told me Wednesday, it's impossible to believe that Mr. Coleman would push ahead with a policy move that was so politically fraught without discussing it with his colleagues in cabinet.

You would think that the Premier of the province would have been given a heads-up on this. Christy Clark's brother, Bruce, was a senior-ranking executive in Pacific Western until three years ago. He's a good friend of Mr. Kinsella. While there are no direct links between Mr. Clark and this decision, at least on the surface, the Premier should still have been notified about what was coming down the pike given the discussion it might ignite.

If she did know about this, it's even more concerning.

It's perhaps not a surprise that the policy change wasn't announced publicly by government. Beer suppliers were informed by an internal memo distributed by the LDB. That's when the agents for the national breweries found out exactly what was going on, which prompted them to march into the offices of some Liberal MLAs looking for answers.

They didn't have any. They were as horrified and concerned as representatives from the breweries association about how bad this looks.

Mr. Coleman, it would seem, has tremendous personal discretion when it comes to making decisions around liquor policy. Too much, in my opinion. Any rulings involving areas such as liquor and casinos have to be completely transparent and defensible.

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This decision failed on almost every count. And we still don't know where it will end up.

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About the Author
National affairs columnist

Gary Mason began his journalism career in British Columbia in 1981, working as a summer intern for Canadian Press. More

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