Times have undoubtedly been tough for many in Kelowna-Lake Country, but on April 1, it’ll become especially tough for our local breweries, distilleries, cideries and wineries.
That’s because they’ll be hit with the most significant increase in excise tax ever — an estimated 6.3% tax hike.
The source of this hike is simple, since 2017, the federal government has set the excise tax as an automatic escalator tax increase tied to the Consumer Price Index. In practical terms, that means the excise tax increase is tied directly to Canada’s inflation rate.
So, after struggling through record-high inflation in 2022, our local farmers and manufacturers who produce value added products must now face a record-high tax hike in 2023.
Worse yet, as this tax is automatically set, no MP is allowed to vote, whether they agree or disagree, that a hike of this nature is even appropriate given current economic conditions.
Among our G7 partners, Canada already holds the record for some of the highest taxes on alcohol, such as the tax on beer. On average, 46% of the retail price of beer is tax, with no return to the producer. The excise tax hike won’t just hurt local producers but all those who sell our world-class local beer, wine, ciders and spirits. The extra cost will eventually trickle to retailers, licensees such as restaurants, and ultimately consumers.
Our vibrant beverage sector contributes thousands of local agriculture, tourism and hospitality jobs. Margins in these sectors have already been diminished through increases in payroll taxes that kicked in on Jan. 1st, and increases in pretty much all other operating costs, such as transportation and utilities.
A recent report from Restaurants Canada showed more than 50% of licensed restaurants in Canada are losing money or barely breaking even. They calculate this April Fool’s Day excise tax hike will also cost the average restaurant more than $30,000.
The Canadian Federation of Independent Business reported the average small business took on $150,000 in new debt during the pandemic lockdowns and the vast majority of them have not paid this back, nor have sales rebounded to pre-pandemic numbers for all. With higher interest rates increasing their debt servicing costs in addition to other cost increases, this is compressing their cash flow.
For those in the alcohol beverage sector, they will now be hit with this 6.3% tax increase further making it difficult to get ahead of their debt.
It’s for all these reasons that I wrote to the finance minister, Chrystia Freeland, asking for an immediate freeze on the automatic tax increase, saying it is bad for both our local and national economies.
As I stated to the minister, “Producers will be left with the choice of absorbing this cost increase and adding to their debt loads, or passing on this cost to both consumers and our restaurant and hospitality businesses, fuelling inflation more.”
I am still waiting for a reply.
The issue of yearly automatic escalator tax increases was one of the first topics I started advocating against when first elected in 2019 and I have spoken many times in the House of Commons about it.
I will continue to press on this issue so our local breweries, wineries, cideries and distilleries, as well as the greater hospitality sector, won’t have to bear this extra financial burden which will further fuel inflation.