Government's Costly Proposal for Liquor Retailing
The privatization of liquor sales would be an extremely expensive mistake, costing Saskatchewan hundreds of millions of dollars in lost revenue, according to a new report by the Canadian Centre for Policy Alternatives.
The report, Down the Drain: The Saskatchewan Government’s Costly Proposal for Liquor Retailing, found that:
- The government’s privatization proposal involves slashing the mark-up on liquor by 25%. Though this would drastically decrease public revenues collected from liquor sales, the government’s backgrounder doesn’t mention the cut outright, instead framing it as a way to “level the playing field” in liquor sales.
- Fragmenting Saskatchewan’s large, highly efficient public liquor retailing system into a collection of private stores will drive up wholesale costs, meaning more loss of public revenue.
- Even taking into account the extra taxes and lower operating costs that privatization promises, Saskatchewan stands to lose $115 million in public revenue over just the next five years, because of the lower mark-up and increased wholesale costs.
- Even assuming all private stores will be taxed at the higher 12% rate, the extra corporate income tax that Saskatchewan collects from private liquor sales will be well under $1 million per year. And closing 40 public liquor stores will only save about $10 million per year in operating costs.
- If Saskatchewan had the same gross profit as heavily-privatized BC, it would have earned $65 million less in 2014. If Saskatchewan had the same profit margin as fully-privatized Alberta, it would have missed out on $131.7 million – more than half its annual profits.
The report concludes that if the Saskatchewan government wants to increase convenience and selection in liquor retailing, privatization is the wrong way to go about it. By expanding and upgrading its system of public liquor stores – as other provinces have done – Saskatchewan could improve the consumer experience without sacrificing public revenues.