Canada is set to experience its most significant alcohol tax increase yet, which is expected to impact the cost of beer, wine, and spirits. The “escalator tax” will increase by 6.4% on April 1st, unless a change is announced before then. Introduced in 2017, the tax is designed to automatically increase over time based on the inflation rate, leading to its largest increase due to recent inflation rates in Canada.
Sylvain Charlebois, a food distribution professor at Dalhousie University, predicts that the tax increase will result in a price increase of a single beer by one cent, while industry experts warn that it will increase costs for producers and distributors and could have a ripple effect on what consumers pay. Beer Canada states that Canada has the highest alcohol taxes among G7 nations and is calling on the federal government to freeze current alcohol taxes until inflation reaches closer to the Bank of Canada’s two per cent target.
Industry group Restaurants Canada estimates that the tax increase will cost Canada’s food-service industry about $750 million a year. The organization is concerned that the increase could have a severe impact on the industry, particularly given the impact of inflation on other industry costs such as packaging and freight costs. Despite this, MPs voted in favor of the motion to cancel the alcohol tax increase, and lobbyists are moving against it.
