Increases in taxes are top of mind for businesses and families. For many local small businesses in Kelowna-Lake Country and across Canada, there's growing concern about the alcohol excise tax increase hitting their bottom line by 4.7% on April 1st.
Local wineries, breweries, cideries and distilleries will face this significant tax hike. The tax increase, known as the "escalator tax," is tied to inflation, so it is higher in years when inflation was high the previous year. "Escalator" is just a fancy bureaucratic word for automatic.
It is an automatic tax increase put in by the current government. Therefore, it is not included in budgets, and there is no debate or vote in Parliament. I am against this and believe that any tax increases should be debated and voted on by parliamentarians.
This dates back to 2017, when the current government set this automatic escalator tax increase tied to the Consumer Price Index. In practical terms, that means the excise tax increase is tied, via a formula, to Canada's inflation rate.
The current government proceeded at that time despite objections from Conservatives, industry leaders, and small businesses. There were also warnings that it might lead to trade disputes, which it did with Australia.
When I was first elected in 2019, I spoke out against these annual automatic escalator tax increases and have made the case about its unfairness every year since.
This excise tax increase comes at a time when our local beverage producers and those in the hospitality industry, such as restaurants and pubs, are already grappling with rising costs of everything including raw materials, packaging, energy, rent, and transportation. Many have incurred extra debt loads and have not seen sales return to 2019 levels. With interest rates being high, more of their bottom line goes to debt financing.
Canada’s alcohol producers stepped up during the pandemic to retool and manufacture sanitizer and they are thanked by yearly excise tax, payroll tax, and carbon tax increases.
Over 95% of wineries, breweries, cideries and distilleries in Canada are small businesses. Many local producers have reached out to me expressing their concern about costs and tax increases.
Ultimately, this excise tax increase gets passed onto the consumer and it, in itself, perpetuates higher inflation. It’s estimated this excise tax increase will cost Canadian taxpayers around $100 million in 2024-25. This is at a time when Canadians are dealing with the highest cost of living and highest interest rates in decades.
Appeals have been made to the federal government by industry organizations and most recently by open letter to the Minister of Finance with an “urgent appeal” from a group of unions representing brewery, beer retail, and distribution workers from across the country citing this tax increase poses a threat in jeopardizing the livelihoods of their workers
Canada’s Conservatives have been continually calling for an end to all new taxes and all tax increases, including the excise tax increase.
Canadians, whether trying to look after their family, business, or own home, cannot afford the federal government taking more money out of their pockets.
I will keep pushing to stop this April Fools Day tax increase so that local producers and those in the hospitality industry won't have to shoulder an additional financial load that will be passed onto consumers and further fuel our cost of living crisis.
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