I went looking for information on Alberta's privatization of liquor distribution and discovered this. I know many of you will ignore this information because of where it comes from, but please take a serious look at it with an open mind as to why we are discussing this. I am sure much of it is valid confirm able information. It gives us a real look into Alberta's privatization.
http://www.policyalternatives.ca/sites/ ... result.pdfCanadian Centre for Policy Alternatives/Parkland Institute
The Alberta Liquor retailing Industry Ten Years After Privatization
Page 2
In 1993/94 the Alberta Government implemented major policy changes involving the control, taxing,
and distribution of liquor products. These changes included privatization of the retail and warehousing
functions, switching from an ad valorem (percentage of price) to a unit (flat) tax system of
alcohol excise taxes, and the ending of direct control of liquor regulation and moving to a legislative
and enforcement approach. Ten years later the retail industry has evolved into monopolistic competition
with its inherent excess capacity and high costs. The government has lost effective control of the
liquor industry which will likely continue to evolve into an oligopolistic market structure as chain
stores get greater control. Against the trends in other jurisdictions, liquor consumption has increased
(with its potential risks of increasing social ills), wholesale costs have risen, and retail prices have
increased. Although retail prices have increased, the tax revenues to government have fallen significantly.
NOTE: Tax revenues have fallen significantly.
Page 3
The main changes in the industry ten years after privatization include the following: Retail outlets (excluding off sales) have more than tripled from 310 to 983. The individual stock items have increased over five- fold, from 3,325 to 17,000. Jobs have increased from approximately 1,300 to 4,000, while wages have fallen from over $14 per hour (in current dollars), plus a benefit package and civil service pension, to approximately $7 per hour. Warehousing has changed. The one publicly-operated warehouse in St. Albert, in 1993, is now operated by a private firm, and three private firms are licensed to wholesale beer out of warehouses in Calgary and Edmonton.
Tax revenues to the province have fallen significantly while employees have lost 50% of their wages. This means they are also contributing much less to the public coffers and have lost 50% of their purchasing power. Does anyone truly believe this is in the best interest of the province of Alberta. On top of that the profits made from these cuts are probably leaving the province and Canada to head office coffers in Germany. At least any Exel portion.
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Alberta government revenue from the sale of alcohol has fallen since the introduction of the unit tax (1993). The rates were decreased as the private marketing of alcohol led to price increases— increases which have been moderated because the share taken as government revenue has fallen.
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Table 4.1 that, with Alberta’s pre-1993 ad valorem taxes, the percentage tax increased with the alcohol content of the product. With the introduction of private alcoholic beverage retailing, Alberta changed to a unit (flat) tax regime on alcoholic beverages. With the separation of wholesale and retail prices in a privatized distribution system, the continued application of an ad valorem tax would have caused greater administrative problems with constant fluctuations in wholesale prices. The tax rates for Alberta under this unit tax regime are shown in Table 4.1
The initial unit tax system was introduced in November 1993 as ALCB sold off stores to the private sector. As the private retail market developed, prices started to rise and the Alberta government reduced the flat tax rates in August 1994, phasing the reductions in through a surcharge starting at 10% and falling by 1% every four weeks over the year.
CHECK OUT TABLE 4.1 ON PAGE 4 it shows the decreases and probably explains why Homeownertoo
saw price decreases.
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It is worthwhile to compare Alberta’s tax revenue under the new unit tax regime to that of British Columbia where liquor control is still similar to what Alberta’s was prior to privatization. Alberta and British Columbia both had an ad valorem alcoholic beverage tax system prior to 1993 before the Alberta government shifted to a flat tax method simultaneously with the introduction of privatization of the retailing of alcoholic beverages in Alberta. Figure 4.1 illustrates alcohol excise tax revenues as the percentage of total provincial revenues. At 3.02%, Alberta tax revenue in 1990 was a somewhat higher percentage than the national average (2.5%), while British Columbia at 2.66% was closer to the national figure. In Alberta, liquor tax revenues declined to 2.18% by 2002, while British Columbia revenues, although also falling somewhat, have experienced greater stability, remaining close to the Canadian average of 2.5%.
Figure 4.2 shows the same alcohol tax revenues in a different way. In this figure, revenues are measured in constant dollars (1992) per capita. In the early 1990s, prior to privatization, Alberta obtained considerably higher per capita revenue from liquor sales compared to British Columbia. After privatization, the alcohol tax revenue in Alberta began to decline and has become less than British Columbia’s after 1997.
Figure 4.3 shows the revenue in current dollars realized on each litre of absolute alcohol sold. This figure shows how Alberta’s revenue has changed from being greater prior to 1997 to less than that realized in British Columbia after 1997. Consumption in Alberta has risen to 8.6 litres in 2001, while consumption in British Columbia has fallen to 7.7 (Figure 2.1), yet the dollar revenue per litre absolute alcohol has been maintained and increased in British Columbia while it has fallen in Alberta.
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Laxer et al asked in 1994: “Will it [the flat tax regime] be as or more efficient than the previous public system was in producing revenue for the provincial government during its current program to balance the budget? In short, will privatization contribute to a more fiscally responsible Alberta?” The answer to this question is clearly NO. The revenue-neutral policy of the Alberta government was ‘successful,’ liquor revenue was constant in absolute current dollars over the period. However, with inflation, growth in population, and growth in sales, a constant level of revenue is really a loss. Measured appropriately, the
current unit (flat) tax system in Alberta has resulted in lost revenue to the province from alcohol beverages.
Realizing that this is privatization of the whole liquor system and a change in the tax system to a flat tax to make that work (as explained in the article) I am sure we would see some of the same things happen. It probably looks great to the consumer as Homeownertoo says "decreased prices". I believe this is why Homeownertoo saw those decreased prices. But do we really want decreased prices at the cost of possible decreaseas in revenue to government, loss if income to employees, all in the name of profit for an out of country company to take home . I know I don't.
