There is one tax increase we know is coming even before Finance Minister Chrystia Freeland unveils her fall economic statement: Booze.
The annual tax hike on beer, wine and spirits scheduled for April 1 has been set at 4.7% unless the government steps in to bring in a smaller tax hike.
In 2017, back when inflation was low, the Trudeau Liberals increased the federal excise tax on beverage alcohol by 2% and set an annual increase to be determined each fall by the inflation rate.
While the tax was opposed by the restaurant industry, as well as brewers, distillers and vintners across the country, at roughly 2% a year, the tax was more manageable. With inflation up significantly in the last few years, things are getting more difficult.
Last year, the tax was set to increase by 6.3% until a public relations campaign shamed the government into backing down. At the time, Restaurants Canada estimated the federal government would take in an extra $750 million from that tax, but also that it would result in lost sales, lower revenue and layoffs.
The full court press by the hospitality industry included an ad campaign featuring Bob and Doug McKenzie of SCTV fame. The commercials on radio and online told the Liberals to “Stop hosin’ us, you hosers.”
Under mounting pressure, the feds capped the tax at 2% last spring, but it’s now slated to increase by a whopping 4.7%.
Restaurants are already dealing with food prices that have increased at the fastest rate in more than 40 years. Although inflation overall is slowing, food prices continue to climb at a faster pace, according to Statistics Canada.
While the inflation rate for September was 3.8%, food prices increased by 5.8% that month compared to a year earlier. Meat was up 4.4%, dairy products were up 4.0%, but bakery products increased by 8.0% while cooking oil, an essential staple in any restaurant, jumped 14.8%.
Now, the federal government wants to add an additional 4.7% to the price of alcohol and squeeze that bill a little tighter.
“Canadians are struggling with inflation and the last thing we need is the feds making it more expensive to enjoy a cold one at the end of a long work week,” Franco Terrazzano, the federal director of the Canadian Taxpayers Federation, said recently. “Prime Minister Justin Trudeau should be trying to make life more affordable and that means scrapping his alcohol tax hikes.”
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As the CTF points out, taxes already account for about half of 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 overtaxed product.
The federal government collects about $20 billion in taxes on beverage alcohol, they don’t need more.
The Canadian Chamber of Commerce has called on the Trudeau government to end the annual increase in the name of helping a hospitality industry that is still recovering from the effects of the pandemic. That’s unlikely to happen, though, given how addicted the government is to spending taxpayer money, but Freeland and Trudeau would be wise to listen to the Chamber.
If they go ahead with the massive tax increase, they will be harshly and unfairly targeting an industry that needs assistance, not punishment.