Beer industry says looming tax increase latest blow to tapped out sector

Those who speak for Canada's beer industry say a sizable tax increase which will take effect next month should be reconsidered — calling it the latest blow to financially-squeezed breweries. 

The federal government is set to increase the country's beer excise tax by 6.3 per cent April 1 to account for inflation. Excise duties are also imposed on spirits, wine, tobacco, cannabis and vaping products.

Shane Groendahl, co-founder of Blindman Brewing in Lacombe, Alta., north of Red Deer, said the increase will cost the brewery an additional $5,000 per year.

"We do have a smaller or a lower rate than larger multinational brewers do, but that doesn't mean that it doesn't apply pressure to us in the same way," Groendahl said. 

The rate is applied according to the volume a brewery produces and the amount of alcohol in the beer. For domestic brewers, the current excise tax ranges from $3.482 to $29.597 per hectolitre (100 litres) of beer, for beer containing more than 2.5 per cent absolute ethyl alcohol by volume.

The federal government will table its next annual budget March 28, days before the tax increase is set to take effect. 

In a recent report, the House of Commons Standing Committee on Finance — which includes political parties across all affiliations — recommended the upcoming budget include a freeze on federal beer, wine and spirit excise duties. 

They recommended the excise tax be held at 2022 rates for 2023 and 2024, and until inflation returns to the Bank of Canada's one-per-cent to three-per-cent target range. Trade association Beer Canada submitted that recommendation. 

Beer Canada president CJ Hélie said Canada already has the highest beer taxes in the G7. 

"Taxes are already really, really high … it's not a tax reduction, it's not a tax cut, it's not a handout. It's just saying let's freeze the rates right now given the unique circumstances," he said. 

"Brewers in Alberta and elsewhere are facing these huge operational cost increases." 

Hélie said Alberta barley prices have increased about 60 per cent, packaging costs have increased about 40 per cent and transportation fees have nearly doubled. 

The 6.3-per-cent increase is the biggest that Christine Comeau, executive director of the Canadian Craft Brewers Association, has seen, she said. 

The group wants Ottawa to reconsider the way the tax is levied. The national body said Canada is home to more than 1,100 craft breweries that account for more than 21,000 jobs.