The federal government’s plan to hike excise taxes on beer every year will result in consumers paying more for the alcoholic beverage and business owners investing less in their operations, says an industry association fighting the change.
The industry is already grappling with high taxes, said Beer Canada, a trade association for the country’s major brewers. These future increases, which will be tied to inflation, will only exacerbate the challenges it’s facing and possibly accelerate the slowing of beer consumption in Canada, the organization said Tuesday.
“Beer drinkers are going to be faced with higher prices because of higher taxes. That’s not favourable for sales,” said Luke Harford, the association’s president.
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“Brewers are going to be left with less money to invest in their plants, their people and their communities – and that’s not a good thing either,” he added.
Beer Canada officially launched a campaign Monday asking suds-loving Canadians to sign a petition requesting that Finance Minister Bill Morneau axe the escalating beer tax. The petition, which the group started sharing several weeks ago via its social media channels, collected 15,400 signatures as of Tuesday morning, according to the association.
In last year’s federal budget the Liberal government increased the excise duty rates on alcohol products, including beer, by two per cent, Finance Minister spokeswoman Chloe Luciani-Girouard said in an email. That amounts to about a nickel per 24-bottle case of beer, she said.
At the time, the government also announced it would annually adjust the tax by indexing it to the consumer price index with the first inflationary adjustment coming this April.
“It’s worth remembering that the last effective increase to the federal excise tax was over 30 years ago,” said Luciani-Girouard, adding small Canadian brewers are charged decreased rates on the first 7.5 million litres of beer.
“The annual inflationary adjustment will provide alcohol producers with greater certainty in the future and is in line with actions taken by many provinces,” she said.
But Beer Canada wonders how the 50 brewers it represents will manage these yearly tax bumps.
“When we have this built in every year, it’s really making it, you know, difficult to operate,” said Dave Fenn, co-owner of Howe Sound Brewing in Squamish, B.C., which is a Beer Canada member.
Already, federal, provincial and municipal taxes on beer products are high, according to Beer Canada, which estimates 47 per cent of the current price of beer in Canada is tax – a figure Fenn said reflects his brewery’s pricing.
The sector’s also been hit by other pressures, Fenn said, like high material and energy costs, and increasing labour costs.
Any additional tax really squeezes breweries, he said, as many products are priced at their ceiling.
In the first year, some brewers may be able to absorb the cost, Fenn said, but they’ll soon be looking at making small price increases or reducing production costs by decreasing labour or increasing automation.
Rising prices likely contribute to why people in Canada are drinking less, according to Beer Canada.
Between 2012 and 2016, per capita beer consumption decreased 7.55 per cent from 83.4 litres to 77.1 litres, according to the industry group’s figures.
