By now, most people on both sides of the Michigan-Ontario border are tired of hearing from politicians about Line 5. And so they should be. The stakes are too high for political games.
Hundreds of thousands of businesses of all sizes across the country have been affected by the COVID-19 health and economic crisis. In general they’re grateful for the government’s continued engagement and responsiveness as they try to mitigate the devastating impacts of the pandemic on businesses and their employees.
But for the hospitality industry, agricultural and other supply chain members, alcohol producers and consumers, there is a sticking point: they need Finance Canada to repeal the alcohol escalator tax in the government’s upcoming fall fiscal update. The escalator tax is an automatic increase to excise duties that has gone up four times in the last three years and is scheduled to increase again next April 1, an April Fool’s trick that will further drive up the price of beverage alcohol for consumers and businesses that are struggling.
Canada has some of the highest alcohol taxes in the world. On average, 47 per cent of the price of beer in Canada is from federal or provincial taxes. Approximately 65 per cent of the price of wine is due to taxes and on average 80 percent of the price of spirits is taxes. In sum, Canadians already pay about $20 billion per year in alcohol taxes. The escalator tax increases that tax burden even more every single year on April 1.
The pandemic has dramatically cut bar and restaurant sales for all beverage alcohol. Another escalator tax hike will increase hospitality industry costs, reducing their ability to attract customers and retain employees while they try to survive and recover from government-imposed shutdowns. As new indoor dining restrictions are implemented in various parts of the country and patio season ends, tens of thousands of restaurants and bars are in danger of closing their doors permanently. An increase in excise duties will also hurt Canadian brewers, wineries and distillers, who will lose access capital they desperately need to invest in their operations, employees and products as they try to navigate the huge losses of sales to restaurants and bars.
When the escalator tax was first introduced, the Canadian Chamber of Commerce warned that a permanent automatic increase in duties every year was a mistake, given Canada’s exceedingly high alcohol tax rates. What’s more, the automatic escalator evades parliamentary and prevents the government from adjusting to economic circumstances like those we are experiencing right now.
Now is not the time to increase alcohol taxes on ordinary Canadians or on our struggling restaurants, bars and domestic alcohol producers. Our request to government is to repeal this automatic escalator at the earliest opportunity. At a minimum, the escalator tax increase should be frozen so it does not increase excise duty rates on April 1, 2021.
Along with more than 250 business leaders from right across Canada, I recently wrote a letter to Finance Minister Freeland to ask for her help in ending this threat to an important sector’s ability to recover. Given the Prime Minister’s strong assertion that now is not the time to increase taxes on Canadians, we hope our message will be well received and acted upon.
Hon. Perrin Beatty, PC, OC, is the President and CEO of the Canadian Chamber of Commerce.