Canada is gearing up for its biggest ever alcohol tax increase

Canadians are primed for a hefty increase on federal tax on alcohol in what has been earmarked as the country’s biggest price hike yet.

According to reports via Global News, the price hike on alcohol known as ‘escalator tax’ is set to increase by 6.4% from April unless a change is announced prior during the federal budget this week.

Food distribution professor at Dalhousie University, Sylvain Charlebois told local reporters that the tax, which was introduced in 2017, was originally designed to automatically increase over time alongside the rate of inflation in an effort to avoid renegotiating it too often.

However, following the amount of inflation Canada has experienced of late, the tax is now set for its biggest increase ever. To illustrate the difference, last year, the tax went up 2.4%.

Charlebois has also forecast that the tax will likely increase the price of a single beer by at least one cent, while the finance ministry revealed in a statement shared by Global News that the amount would be more like three-quarters of a cent.

Charlebois said that the price increase would be visible immediately after the tax is scheduled to be implemented on 1 April.

According to reports, Beer Canada stated that the tax increase will bring up the price of a 12-pack by 10 cents. According to figures from the Canadian Revenue Agency, a 750ml bottle of wine could see a price increase close to three cents. In an additional statement to the Canadian Press, the Liquor Control Board of Ontario (LCBO) said that a 750ml bottle of a spirits at 40% ABV may increase 70 cents.

Charlebois said that the tax may have a smaller impact on the price of craft beer since it is lower volume and usually at a higher price, but could affect larger manufacturers more. Beer Canada also hinted that the tax could have a ripple effect on costs, as well since it included a production tax imposed on the brewer which “is then magnified by other fees and taxes imposed by distributors, retailers, and provinces, including sales taxes,” it revealed and suggested that it would make the impact on a 12-pack likely closer to 20 cents.

According to the organisation, alongside inflation, the reports highlighted that beer retail prices are projected to rise 10% in 2023. Beer Canada also reiterated how there has been a 60% increase in barley prices, a 40% increase in packaging costs, and a doubling of freight costs which are already taking their toll on the industry.

Overall, the escalator tax alone will allegedly amount to an extra CAD$125 million a year that Canadians will pay to the government. Charlebois added: “It’s just one tax people don’t need right now. It doesn’t seem like much, but it’s more that the tax burden is only increasing. It’s a lot of pressure.”