Commentary
It’s like an unwanted New Year’s resolution and an April Fool’s joke all wrapped into one. The federal Liberal government is set to automatically increase the alcohol tax by almost 5 percent on April 1. Just when Canadians thought they were getting a reprieve on crushing inflation, Prime Minister Justin Trudeau’s government sets us up for one more product increase.
Now is the time when alcohol—and the cost of alcohol—is most on the mind, and now is when we have a whiplash relationship with booze.
It’s the season for holiday work parties, family gatherings, and of course New Year’s Eve bashes. It’s a big drinking season. Then, right after, is the growing trend of Dry January, when people vow to go without booze for the entire month to make up for the excesses of the month before.
Alcohol sales have, by some metrics, declined in Canada recently. Consumers are also opting to buy more non-alcoholic beer and spirit options—a category that is seeing modest but steady annual increases in sales.
There are a lot of reasons why people might choose to reduce their alcohol purchases. They may feel they’re drinking too much, or they just want to save money. If there is a decline though, it should be a voluntary one.
It shouldn’t be because the federal government is making it more expensive. This only harms Canadian producers and the restaurant and hospitality industries.
The Liberals previously set alcohol taxes to go up annually in line with inflation. This is called an escalator tax, because it automatically goes up by itself. There was outcry at the time from the public and industry when the escalator was set.
“When the escalator tax was first introduced, the Canadian Chamber of Commerce warned that a permanent automatic increase in duties every year was a mistake, given Canada’s exceedingly high alcohol tax rates,” writes Robin Guy, vice president of the chamber, in a recent open letter sent to Deputy Prime Minister Chrystia Freeland.
“What’s more, the automatic escalator evades parliament and prevents the government from adjusting to economic circumstances like those we are experiencing right now.”
The chamber’s letter calls for the Liberals to prevent the April 1 4.7 percent tax hike from coming into effect. They urge that it either be paused entirely or have a cap placed on it.
The feds placed such a cap on the tax for the 2023 budget. The booze tax was supposed to go up 6.3 percent earlier this year, but the Liberals acknowledged that was steep and instead capped it at 2 percent. Now, the chamber and others want a repeat of that approach.
The Liberals certainly should keep the tax hike low or just do without it entirely. Alcohol prices have already gone up due to a rise in the cost of inputs, and the restaurant industry continues to be hard hit. It’s still struggling to return to pre-pandemic levels.
But what’s the point then of having an escalator tax in the first place? This whole exercise shows the folly in such automatic increases.
These sorts of tax hikes work during good economic times, when nobody really notices modest increases. They don’t work though during times of turmoil, when every dollar counts.
The Liberals find themselves increasingly under siege for their tax-and-spend ways. As businesses and individuals look to find savings wherever they can, they’re scrutinizing their tax burden and making harsh assessments of what they deem to be unfair. The collapsing carbon tax may just be the beginning of a broader tax revolt.
Why should it be up to alcohol consumers to help fund Liberal spending priorities that leave us in debt and deficit? Now apply that same logic to other target groups facing significant tax increases. The answer should be to call for fiscal restraint and responsible budgeting, instead of automatic tax hikes.
“Such action would not only be welcomed by consumers but also by the thousands of Canadian jobs and businesses that rely on alcohol sales,” Guy says of halting or capping any increases.
The booze tax hike is unfair. Let’s hope the holiday spirit helps the government come around.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
