Canada’s beverage alcohol tax, which has been tied to inflation since 2017, will see an automatic increase of 6.3% on April 1st. This is the largest year-over-year increase in 40 years and means that the tax will account for over 50% of the cost of beer in some areas of Canada.
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New Alcohol Tax
The President of Beer Canada, CJ Hélie, has expressed concern over the impact of the tax hike on the beer industry, which has already been hit hard by the slow rebound of the hospitality and dining sectors.
Hélie explained that inflation has spiked unexpectedly, causing barley prices to increase by 60%, packaging by 40%, and freight costs to double.
Despite these increases, brewers have been hesitant to raise prices, as the industry is projected to be down almost 1% from last year, which is far from pre-pandemic levels.
The slow reboot of sporting events, concerts, festivals, and other similar events in 2022, combined with labour shortages, has led to an increase in the costs of behind-the-scenes needs, including taxes.
According to Hélie, Canada has the highest beer tax of any G7 country, with the tax accounting for 47% of the cost of beer in BC and similar numbers around the country.
Beer Canada
While Beer Canada is not advocating for the elimination of beer taxes, Hélie has questioned whether 47% is too high and noted that G7 countries like Japan and the US have either decreased or are planning to decrease beer taxes, while Canada plans to increase federal beer taxes every year by inflation.
Beer Canada had opposed the automatic tax increase since its introduction in 2017 but never expected it to spiral so far out of control. Hélie noted that the government’s response had been dismissive until the past 12 months when politicians from all parties began voicing sympathy for Beer Canada. Hélie is confident that a bill to freeze beer taxes would have overwhelming support in the House of Commons.
The automatic increase in Canada’s beverage alcohol tax on April 1st is expected to have a significant negative impact on the beer industry, which has already struggled due to the slow recovery of the hospitality and dining sectors. Beer Canada has been critical of the tax hike and is advocating for a freeze on beer taxes in the future.