Blog Oct 08, 2020

Freeze the Alcohol Tax


Only a few weeks ago, Prime Minister Trudeau was asked whether Canadians can expect tax increases to help pay for the significant increases in government spending that have occurred in response to the COVID-19 pandemic.  His response came as a relief to Canadians and businesses when he said, “No. The last thing Canadians need to see is a raise in taxes right now.”

Notwithstanding the Prime Minister’s statement, Canadians and struggling restaurant and hospitality businesses ARE scheduled to be hit with an increase in taxes on beer, wine and spirits next April 1. However, they are not just facing this increase next year, they face an increase in alcohol taxes on April 1of every year because of the alcohol escalator tax.

For those unfamiliar, what is the alcohol escalator tax? Former Finance Minister Morneau in Budget 2017 introduced it when the government decided that, going forward, it would automatically increase the excise duty on beer, wine and spirits every year, forever. The measure was passed into law without any supporting economic analysis and means future increases are not subject to any parliamentary scrutiny.

When the measure was first proposed, Canadian brewers, wineries and distillers made it clear to the government that a permanent tax increase mechanism that singles out their industry and does not account for economic conditions was a bad idea. Fast forward to 2020 and we are seeing first hand the problem with an automatic tax hike that does not take into consideration the economic pain that businesses are going through. 

The ongoing impacts of the pandemic have been especially devastating for Canada’s hospitality industry, including the tens of thousands of Canadian bars and restaurants that rely on alcohol sales. Things are so bad that a Canadian Chamber survey found that nearly 60% of Canadian restaurants could fail within the next three months. It is, without a doubt, the worst time to force these businesses to raise the prices of alcohol. Yet, here we are with the escalator tax scheduled to increase the excise duty again on April 1, 2021.

On Tuesday, September 15, the Canadian Chamber launched the Freeze the Alcohol Tax campaign to support Canadian restaurants, bars, alcohol producers and all of their suppliers during this difficult period. The campaign ask is simple: we want the federal government to repeal the alcohol escalator tax. If you agree that now is a terrible time to increase taxes on alcohol for Canadians and Canadian restaurants and bars, we would encourage you to support our campaign – visit freezethealcoholtax.ca to find out how.  

We agree with the Prime Minister the last thing Canadians need to see is a raise in taxes right now. It is time for the government’s actions to match those words by repealing the alcohol escalator tax.

Jan Westcott President of Spirits Canada.

Luke Chapman, President of Beer Canada