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The federal alcohol excise tax will increase by 6.3% on April 1, 2023, and rightfully, Canada’s liquor manufacturers are concerned. In 2017, the Trudeau government introduced an automatic tax increase escalator that is tied to inflation. After the April increase, the alcohol excise tax will have increased by 18.4% since it began in 2017.
Canadian Tax Payers Federation Federal Director, Franco Terrazzano, wrote that “Prime Minister Justin Trudeau is rubbing margarita salt in the wound by using high inflation to binge on higher alcohol taxes”, – “Trudeau Bingeing on Alcohol Tax Hikes in 2023”.
Terrazzano’s concerns are being echoed by those in the industry.
In an interview with CityNews, CJ Helie, President of Beer Canada, said that the increase to the alcohol excise tax will force markups at each point in the supply chain: “It is imposed at the manufacturer’s level as soon as they make the product. So what that means is that it’s embedded into the price initially as the supplier sells to the distributor, from the distributor to the retailer, or the bar, and so it gets marked up all along the way.” Miles Prodan, Wine Growers of British Columbia, and Helie, are calling on the government to freeze the tax.
Canadian wine growers, who had exemption from the tax, will also have to begin paying. The government has repealed the alcohol excise tax exemption for 100% Canadian wine. The tax exemption was repealed in part because Australia alleged that Canada was violating the General Agreement on Tariffs and Trade by exempting Canada’s wine growers. Wine producers will have to choose between the lesser of three evils in managing the additional expense: absorb the cost themselves and profit less as a result; increase prices so the consumer takes the hit, or a combination of both.
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