About the tax
Taxes on beer, wine and spirits in Canada are amongst the highest in the world already. But that hasn’t stopped Prime Minister Trudeau and Finance Minister Bill Morneau from proposing a hidden tax escalator that will drain the pocketbooks of Canadians more and more every year.
Within Budget 2017, the Liberals have buried a tax policy that will automatically increase the excise duty rates (tax) on beer, wine and spirits each and every year forever. Beverage alcohol producers remit excise duties based on what they produce and the federal government expects them to, in turn, recover the loss by charging higher prices to their customers. Excise is the first of many taxes with the GST, PST or HST layered on top of them all. What is being proposed is not just a tax-on-tax measure but one that automatically increases every year without any requirement to be reviewed by bureaucrats or parliamentarians – hardly a “transparent” or “accountable” system!
A hidden excise escalator that automatically increases the tax on wine, beer and spirits is unfair to lower and middle income Canadians. Excise is a regressive tax and is based on volume, not on price. The hidden escalator will have the biggest regressive impact on Canada’s “value priced” wines, beers and spirit brands where excise makes up a higher proportion of the final price.
The restaurant and foodservice industry employs 1.2 million Canadians, many of whom are young, students, and/or first-time employees. The proposed escalator planned by Prime Minister Justin Trudeau and Finance Minister Bill Morneau will pull an additional $470 million dollars out of productive use, not including the higher GST revenues the federal government will take in. The escalator is a real blow to the restaurant and foodservice industries as it will force small business owners in this sector to scale back operations and eliminate positions, negatively affecting employment opportunities for young adult Canadians.
The Prime Minister and Finance Minister need a lesson in Canadian history: a similar automatic excise rate on beverage alcohol was imposed by the federal government in the early 1980s and its effects on Canada’s beer, wine, and spirits industries were devastating. Twelve Canadian distilleries closed, thousands of jobs were eliminated, and the competitiveness of Canadian whiskey was diminished on the world stage. Speaking of competitiveness, increased federal taxes on wine, beer, and spirits will make it even harder for Canadian-made products to compete in the global marketplace. As of now, the United States excise taxes on beer, spirits and wine are 56 per cent, 24 and 67 per cent lower than Canada’s, respectively. It is shocking that the Canadian federal government would sabotage the domestic growth and export opportunities of its own brewers, distillers and vintners.