alcohol tax increase

Booze is about to get more expensive in Canada thanks to new federal alcohol tax

Canada is just over one month away from implementing a new alcohol tax that, as of this spring, will see an additional 6.3 per cent added to every purchase of beer, wine or liquor.

Thanks, inflation!

"The federal government reintroduced indexation of alcohol excise taxation in 2017 (to maintain its value in line with inflation)," explains a 2021 report from the Public Health Agency of Canada which, ironically, concludes that taxation doesn't actually reduce overall alcohol consumption or related harms.

And yet, the report authors still conclude that "there is ample scope for increasing excise taxes on alcoholic products in Canada," noting that "the current baseline level of provincial and federal taxation on alcoholic beverages in Canada falls below one-third of the final retail prices of all alcohol beverage types."

Ample scope indeed, it would seem, with the highest alcohol tax rate hike in more than 40 years on deck for 2023.

You see, every year since 2017, the federal government has been automatically adjusting what many call the "alcohol escalator tax" on April 1.

The increase is based on the Consumer Price Index, which spells horrible news for already-struggling Canadians after months upon months of rising inflation.

On April 1, 2022, the tax automatically shot up by 2.4 per cent. This year, on April 1 of 2023, the federal excise tax will raise alcohol costs by a substantially higher 6.3 per cent across the country.

This is in addition to provincial booze taxes, which in Ontario vary based on product type and location of origin, coming in as high as over 60 per cent for spirits. 

Consumers, producers, distributors, and owners of businesses that move a lot of booze (read: bars and restaurants) are all ticked off by what many see as an unnecessarily-large tax hike.

"When the escalator tax was first introduced in 2017 there wasn't much of a fuss because inflation was lower. But even small tax hikes can become big bills over time," reads a blog post published in December by a not-for-profit advocacy group called the Canadian Taxpayers Federation.

"After the 2023 tax hike, the federal government's alcohol excise taxes will have increased 18.4 per cent because of the automatic annual tax hike that was first imposed in 2017. That's what is so pernicious about Trudeau's alcohol escalator tax. At first you don’t really notice it, but every year the tax burden goes up just a little bit."

Restaurants Canada, a non-profit association that represents food service industry professionals nationwide, has for years been pushing back against the escalator tax, which it calls "punitive."

"Excise duties are the first of many federal and provincial markups on beverage alcohol. The cascading effect of these recurring tax hikes means the resulting price increases faced by restaurants and consumers are exponential," reads the organization's website.

"The tax escalator unfairly targets Canadian products and jobs, disproportionately hurting Canadian farmers, vintners, distillers, brewers, restaurateurs and their customers."

Both Restaurants Canada and Beer Canada, a national trade group representing members of the beer industry, are amping up their calls for a deferral to the tax ahead of this coming April.

The latter has gone so far as to construct an elaborate microsite and marketing campaign using the likenesses of legendary SCTV characters Bob and Doug McKenzie, championing the message that "a massive hike of 6.3 per cent" will harm brewers, the hospitality sector and all consumers.

"With sky-high inflation pushing prices higher for food, gas and housing at the fastest pace in decades, the last thing Canadians need is another beer tax increase," reads a call to action on hereforbeer.ca.

"We believe our governments should do their best to keep life affordable, not make it more expensive."

As it stands now, the new tax rate will go into effect automatically on April 1, 2023, as scheduled.

Restaurants Canada VP Mark von Schellwitz says that this will force the average restauranteur to sell an additional $30,000 worth of liquor just to cover the cost of the tax increase.

Lead photo by

Hector Vasquez


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