11/23/2012 07:53 EST | Updated 01/23/2013 05:12 EST

BC Beer Tax Policy Changes Brewing Political Hangover

VICTORIA - Prince George's Pacific Western Brewing Company is continuing to make beer despite earlier threats it would have to shut off the taps because of changes to the provincial government's tax policy.

Those changes would have seen the brewery hit with a massive tax bill for out-growing its micro-brewery status, but the Liberal government said it will address the problem next week, a decision that have left Deputy Premier Rich Coleman with a political hangover.

Officials in Coleman's office released a statement, saying an inadequate version of the tax policy was issued on Nov. 14. and a new one is on the way.

But the release of what the government is calling the faulty-tax policy has upset major brewers and forced Coleman to deny questions of political favouritism.

Coleman's officials said a new policy is being developed, and it includes fair taxation for smaller brewers that still allows them to expand.

"Seven B.C.-based breweries are in a position to grow and benefit from a revised taxation rate and this is really about helping our small breweries produce a made-in-B.C. product that creates jobs in our communities," said the statement.

"We consulted with industry in early 2012, and while commercial breweries opposed further transition because they believe small breweries already receive too much government assistance, small breweries supported a policy that gradually phased out the favourable taxation rate between 160,000 hectolitres and 400,000 hectolitres."

A hectolitre is equivalent to 100 litres of beer. Under the current policy, the higher tax rate the major brewers are charged kicks in when a brewery produces 160,000 hectolitres.

Pacific Western Brewing was about to hit the 160,000-hectolitre mark and the company stated it was considering layoffs or closure rather than pay the increased taxes.

Officials with Coleman's ministry did not confirm reports that the original, but now inadequate policy, would have resulted in tax savings of about $10 million for the smaller breweries.

But Coleman's motives for the tax-policy changes were questioned this week at news his Langley riding held a fundraising auction for the Liberals that included two trips to the Bahamas worth almost $27,000, donated by Pacific Western Brewing's president Kazuko Komatsu.

Coleman could not be immediately reached for comment, but his ministry said he does not deny receiving the trip donations, of which the proceeds from the auction went to the Liberal Party.

Elections BC reports indicate the B.C. Liberals receive political donations from both large and small brewers.

Records of financial contributions filed with Elections BC show so far this year, Pacific Western Brewing Company made donations amounting to $15,550 — including a $1,200 personal contribution from Kazuko Komatsu. In 2011, the total was $24,850.

Those contributions dwarf the tallies posted by the larger beer makers: Labatts donated $750 in each of the last two years, while Molson Coors donated $11,800 in 2011, but only $300 this year.

Sleeman Breweries donated $800 this year, as compared to $346 in 2011, a contribution given for Premier Christy Clark's byelection campaign.

The Beer Store, which is owned by Molson, Labatt and Sleeman, contributed $19,800, including money to the leadership campaigns of Kevin Falcon, George Abbott and Clark. This year, however, the donations were zero.

None of the brewers listed above donated to the NDP.

The statement from Coleman's ministry said the government supports small breweries with favourable tax rates to encourage their growth and development.

"Unfortunately, a miscommunication resulted in a letter being issued on Nov. 14, 2012 outlining a new policy that did not adequately achieve the intended policy objectives," said the Coleman ministry statement. "Work is underway to find a balance between ensuring B.C. breweries are paying fair taxation, while still having the ability to expand, and we expect to announce changes shortly."

Pacific Western spokeswoman Karen Cook released a statement Friday on behalf of company. The statement said Komatsu was travelling and not available for comment.

"We are awaiting the government’s announcement on brewing tax guidelines, as are other small local brewers across British Columbia," said the statement. "We are optimistic that B.C. jobs and local economic opportunities will continue to be a priority. Our employees and partners are working, and very proud of the quality beer we create here in Prince George for B.C. beer lovers."

Representatives of the larger brewing companies could not be immediately reached for comment.

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