Beer Canada is raising concerns following the federal government’s decision to proceed with another tax increase on beer, at a time when affordability remains a top concern for Canadians.
This latest increase adds further strain on Canada’s domestic brewing industry and its unionized workforce, who have joined a growing coalition of voices calling on the government to repeal the escalator policy and return tax decisions to Parliament, said the national organization.
“Canadian consumers already pay some of the highest beer taxes in the world. With today’s increase, the federal excise component will now be more than 20% higher than it was in 2017, when the current system of automatic annual increases was introduced,” it said.
The federal government announced a cap of 2% on this year’s increase, which is irrelevant, as it simply mirrors the rate adjustment already scheduled. In reality, it will result in an estimated $14 million in additional taxes on beer this year alone, added Beer Canada.
It said the policy of unreviewed and automated tax increases ignores core challenges facing the industry, including:
- Rising input costs, particularly aluminum used in beer packaging
- Weak and declining sales volumes across the category
- Declining beer sales volumes in restaurants and pubs
“This policy choice is making life less affordable for Canadians and placing additional strain on an industry that supports jobs in nearly every federal riding,” said Richard Alexander, President of Beer Canada. “From barley farmers to brewers, to pubs and restaurants in our communities, this sector is deeply rooted in the Canadian economy.”
“While targeted support for small brewers is welcome, the reality is that taxes are increasing on more than 95% of beer sold in Canada,” added Alexander. “At a time of declining sales and rising costs, allowing another increase to proceed is the wrong decision at the wrong time.”
Beer Canada said it continues to call on the federal government to cancel future automatic increases, repeal the escalator policy, and restore parliamentary oversight of tax decisions, ensuring they are subject to proper scrutiny and reflect the impacts on Canadian jobs, investment, and affordability.
Beer Canada’s member companies brew 90% of all beer consumed by Canadians annually. The production, distribution and sale of beer supports 149,000 Canadian jobs, generates $13.6 billion in Gross Domestic Product and $5.7 billion in government tax revenues.
Meanwhile, the Canadian Craft Brewers Association said it is delighted with the news that craft breweries will continue to receive a 50% reduction in excise taxes on their first 15,000 hectolitres of beer brewed for an additional two years, along with a 2% cap on the annual escalator.
“This announcement demonstrates the Federal Government’s recognition of the importance of reducing the tax burden on Canada’s locally owned and operated craft breweries. It is a welcome and timely development for our sector, which is facing unprecedented uncertainty for small businesses and workers. Together, these two measures are expected to provide more than $30 million in total relief through to 2028. For typical local craft breweries, this keeps thousands of dollars in their operations, with savings reaching as high as $90,456 for Canada’s larger independent brewers,” it said.
“This change acknowledges the urgent need to support Canada’s smaller breweries, which represent almost 30,000 industry jobs. According to data from Innovation, Science and Economic Development Canada, 63% of the nearly 900 breweries producing less than 15,000 hectolitres annually are not yet profitable. A major barrier to profitability is the level of provincial and federal markups and taxes that small brewers face, and today’s announcement helps address this challenge.
“We applaud the Federal Government’s action and recognize that there is still more work to be done to modernize the excise tax framework to support larger independent craft brewers that produce more than 15,000 hectolitres annually. Collectively, these measures help support Canada’s world class brewers, protect Canadian jobs and ensure Canadians and tourists alike can enjoy the best Canada has to offer. We thank the Federal Government for this announcement and look forward to continued collaboration to strengthen and grow the Canadian craft beer sector.”
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The social contract in Canada is different from that in the United States and other Third World countries. Canadians have made a collective decision to accept higher levels of taxation (income tax, sales taxes, fuel taxes, sin taxes) in return for a better social safety system. This, incidentally, is the same collective decision made by the citizens of countries like Norway, Sweden and Denmark, all of whom pay higher taxes than Canadians. It is only right that taxes on luxuries such as alcohol be increased. Other taxes have gone up significantly in recent years (including property taxes and fuel taxes) so why the brewing industry thinks it is being singled out is baffling.
It is also important to remember why “sin taxes” on products like alcohol and tobacco exist: to help pay for some of the social ills associated with consumption of these products. A portion of the taxes charged on alcohol goes to cover the social costs of ills like impaired driving and the health care expenditures resulting from drinking. Indeed, the World Health Organization stated in 2023 that there is no safe level of alcohol consumption for human health.