The beer industry is once more making a last-ditch appeal for a reduction in the federal beer tax, which is scheduled to rise on April 1, owing to brewers and consumers’ ongoing cost struggles.

As per an official adjustment released by the Canada Revenue Agency in the past week, the excise duty rate will rise by 4.7 per cent this spring to adjust for inflation.

However, Beer Canada, the group that represents numerous brewers throughout the country, wants this rise lowered to two per cent.

If this rings a bell, it is because a similar situation transpired last year. Brewers were staring at a 6.3 per cent rise, a record high, until the federal government capped the tax at two per cent just ahead of the deadline.

“What we’re trying to communicate to the government is that a lot of the rationale and the circumstances that supported that decision last year still exists today,” said Luke Chapman, vice president of federal affairs at Beer Canada.

Chapman says the hike could result in “moderate increases” in retail prices and hurt the already-struggling hospitality sector.

“It would be a great opportunity for the government to come out and say, ‘We hear you … and we’re going to do this one small measure to demonstrate that we’re aware this is a challenging time for a lot of people and raising taxes is not appropriate under the existing circumstances.'”

Inflation-tied tax

Excise duties are also imposed on spirits, wine, tobacco, cannabis and vaping products, and are charged to producers.

The tax has been tied to inflation since 2017, but high inflation over recent years has resulted in tax rates not seen for decades.

Last year, the federal government capped the tax at two per cent right before the April deadline. This year, frustration is again growing among producers as the 4.7-per-cent increase approaches.

The House of Commons Standing Committee on Finance — which includes federal political parties across all affiliations — recently voted unanimously to cap the increase at two per cent again this year.

As per a statement from Katherine Cuplinskas, the press secretary for the office of the Deputy Prime Minister and Minister of Finance, it is indicated that the rates of excise duty are adjusted yearly to account for inflation as per the law.

“We understand that the cost of living is a significant worry for Canadians. Hence, our economic strategy focuses on finding ways to make life more affordable. For instance, we are urging Canada’s major grocery chains to stabilize the prices and implementing supply-side solutions like affordable early learning and child care,” she stated.

The rate is set based on the volume of beer a brewery manufactures and the alcohol present in it.

For local breweries that produce beer with an alcohol content of more than 2.5 per cent by volume, the current excise tax varies between $3.552 and $30.192 per hectolitre (100 litres) of beer.

Smaller cap for smaller brewers

Blair Berdusco, the executive director of the Alberta Small Brewers Association (ASBA), mentioned that small breweries in the province are severely affected by tax hikes. ASBA represents about 130 small independent brewers.

She argued that it might appear to be a trivial increase, but for smallest Canadian breweries, the production cost for a single beer can is significantly higher than for large scale breweries.

Berdusco points out that even a minor increase can be the deciding factor between hiring a new employee, making investments to expand the brewery, or even affording the ingredients for a new product’s production.

Blair Berdusco, who is the executive director of the Alberta Small Brewers Association, has expressed that the ongoing increase might lead to an additional tax burden of $750 to $2,500 a yearly for minor brewers.

Berdusco also suggests that the current uncertainty in the industry makes it challenging for brewers to plan effectively and maintain consumer-friendly prices.

That is why the ASBA, in collaboration with the Canadian Craft Brewers Association, have created a unique proposal that is based on their personal economic impact evaluations.

“We propose a reduction of 50 percent in the current rates for those breweries that produce under half a million hectolitres annually. This includes approximately 1,200 craft breweries throughout Alberta. For anyone exceeding that half a million, we suggest an increase of merely 1.8 percent.”

As the deadline approaches, Berdusco expresses her ongoing optimism that the federal government will continue to address the concerns of the beer production industry.