There’s one tax rise we know is coming even before Finance Minister Chrystia Freeland releases her autumn economic statement: alcohol.
The annual tax increase on beer, wine and spirits scheduled for April 1 has been set at 4.7% unless the government intervenes and implements a smaller tax increase.
In 2017, when inflation was low, the Trudeau Liberals increased the federal excise tax on beverage alcohol by 2%, setting an annual increase determined each fall based on the rate of inflation.
While restaurants, breweries, distilleries and winemakers across the country opposed the tax, the tax was more manageable at around 2% per year. As inflation has risen significantly in recent years, it is becoming increasingly difficult.
Last year the tax was set to increase by 6.3% until a public relations campaign persuaded the government to back down. At the time, Restaurants Canada estimated that the tax would raise an additional $750 million for the federal government, but it would also lead to lost sales, reduced revenue and layoffs.
The hotel industry’s entire court press included an advertising campaign featuring SCTV’s Bob and Doug McKenzie. The commercials on the radio and online urged liberals to “Stop calling us names, you bitches.”
Under increasing pressure, the government capped the tax at 2% last spring, but it is now set to rise by a whopping 4.7%.
Restaurants are already struggling with food prices, which have risen at their fastest rate in more than 40 years. Although overall inflation is slowing, food prices continue to rise faster, according to Statistics Canada.
While the inflation rate was 3.8% in September, food prices rose 5.8% this month compared to last year. Meat rose 4.4%, dairy rose 4.0%, but baked goods rose 8.0% while cooking oil, a staple in every restaurant, rose 14.8%.
Now the federal government wants to increase the price of alcohol by a further 4.7% and tighten the bill somewhat.
“Canadians are struggling with inflation and the last thing we need is the government making it more expensive to enjoy a cold one at the end of a long work week,” Franco Terrazzano, federal director of the Canadian Taxpayers Federation, said recently. “Prime Minister Justin Trudeau should try to make life more affordable, and that means eliminating his alcohol tax hikes.”
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As the CTF points out, taxes already account for about half the price of beer, 65% of the price of wine and more than three-quarters of the price of spirits. The annual escalator tax, which doesn’t even require a vote in Parliament, is just an attempt to rip off consumers on an already overvalued product.
The federal government collects about $20 billion in taxes on beverage alcohol, which is all it needs.
The Canadian Chamber of Commerce has called on the Trudeau government to end the annual increase to help a hospitality industry still recovering from the effects of the pandemic. That’s unlikely given how addicted the government is to spending taxpayer money, but Freeland and Trudeau would be wise to listen to the chamber.
If they continue with the massive tax hike, they will harshly and unfairly target an industry that needs help, not punishment.