But tax-and-spend Trudeau Liberals are too drunk on the money the excise duty on alcohol generates to let it go
News started circulating in late February that Ottawa was planning to increase alcohol prices at an unusually high rate beginning April 1.
The federal excise tax on alcohol automatically increases each year according to the rate of inflation. The proposed 6.3 percent hike on beer, wine and spirits in 2023 would have been the biggest spike in more than 40 years.
It honestly seemed like a cruel joke.
Canada’s restaurants and bars struggled mightily during COVID-19. Some had survived due to federal emergency relief measures, which helped offset their real and expected financial losses. Others had collapsed under the weight of health restrictions, reduced capacity and economic turmoil.
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The last thing they needed to deal with was the threat of higher alcohol taxes. The April Fool must have been working overtime to come up with this wild rumour, right?
Wrong. It wasn’t a moment of levity but an act of pure bushwa.
Canadian restaurants and provincial liquor boards began preparing for an inevitable round of financial repercussions. “Any increase at this very vulnerable time for our industry is just another blow while we’re down,” Brenda O’Reilly, who owns several restaurants and a brewery in St. John’s, N.L., told the Canadian Press on March 24. “It’s like death by a thousand cuts.”
O’Reilly didn’t stop there. She highlighted what could happen if Ottawa passed this ludicrous 6.3 percent alcohol excise duty. “Many of us haven’t recovered from the pandemic and now they want to raise this tax. It’s hard to get blood out of a turnip. We’ll see more restaurant closures if this goes ahead.”
It appears that senior Liberals heard her (and others) and reversed course.
On March 28, Finance Minister Chrystia Freeland revealed a different strategy for federal alcohol taxes. “Budget 2023 proposes to temporarily cap the inflation adjustment for excise duties on beer, spirits and wine at two percent, for one year only, as of April 1, 2023.”
Organizations like Restaurants Canada praised Ottawa for reducing the tax increase to two percent. That’s completely understandable. Alas, they may have missed the key component of this alcohol excise duty reversal, “for one year only.”
Does this mean Prime Minister Justin Trudeau and the Liberals will proceed with a 6.3 percent hike in 2024 instead of 2023? Or could this increase end up being higher due to the delay of one calendar year?
That’s hard to say. It’s a looming possibility if nothing else.
If the Liberals were smart, they would keep alcohol taxes as low as possible for the foreseeable future. If they were clever, they would drop the alcohol excise tax altogether.
Canadians pay an enormous amount of tax on purchases of alcohol in liquor stores, beer stores, restaurants, bars, pubs and other venues. The Canadian Taxpayers Federation pointed out that taxes on beer make up 50 percent of the current cost. It’s even higher for wine (65 percent) and spirits (75 percent). As CTF federal director Franco Terrazzano correctly told CTV News Toronto on March 13, “Canadians are already paying enough tax, more than enough tax every time you buy a pint of beer.”
None of this is a big secret.
I and others have been calling for major changes to alcohol taxation and liquor retailing for decades. This includes liquor and retail privatization to increase choice and reduce taxes on beer, wine and spirits. If provincial governments followed Alberta’s lead and got out of the booze business, or opened up more private retail liquor stores like B.C., the cost to consumers would decrease, and overall sales would increase. It would also enable restaurants, bars and pubs to reduce the cost of drinks to customers.
Why haven’t things changed? It largely comes down to dollars and cents.
Crown corporations, like the Liquor Control Board of Ontario, are cash cows. They make an enormous amount of annual profit – hundreds of millions of dollars in some provinces and billions of dollars in the LCBO’s case. A fair chunk of this money trickles down to provincial government coffers. Few premiers, left-leaning or right-leaning, are keen on losing this steady financial pipeline – and know they can’t replace it that easily.
As for unions, they strongly oppose liquor privatization because their influence in this industry would be reduced to nothing. The only way for them to maintain power is for everything to stay exactly the way it currently is.
The tax-and-spend Trudeau Liberals, who defend crown corporations and firmly believe in working with unions, are onside in both instances. They also implemented the federal alcohol excise duty in 2017 and aren’t going to remove it anytime soon.
Canada’s restaurants, bars and customers won’t be raising a drink to this news, either.
Michael Taube, a Troy Media syndicated columnist and political commentator, was a speechwriter for former Prime Minister Stephen Harper. He holds a master’s degree in comparative politics from the London School of Economics.
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