Canadian Alcohol Tax to Increase by 2% from April 1, 2023

Canadians may see a minor increase in alcohol prices beginning on April 1 as a result of the government’s planned 2% tax increase on beer, wine, and spirits. The excise tax, which is a 2017 policy, will be imposed directly on companies at the point of production and will annually alter the tax rate depending on the consumer price index. Although the fact that the increase is considerably lower than the 6.3% increase that was initially anticipated, it nevertheless puts further strain on firms who are already dealing with growing costs because of rising input prices for things like aluminium, raw materials, barley, and hops.

Any changes to retail costs will depend on beverage alcohol producers, who establish their own prices subject to minimum retail prices and modify pricing throughout the year, according to an LCBO representative. Pricing can also be impacted by variables including exchange rate changes, federal taxes, changes in freight rates, and price changes by rival businesses.

Because that margins are already slim, Cam Moser, Senior Manager of Craft Brewery Finance at Canadian Western Bank, predicts that the majority of the increase will be passed on to customers. He does, however, think that customers might not immediately notice any big effects.

According to Statistics Canada, the country’s alcohol sales have decreased. In 2022, the amount of beer sold per person reached an all-time low, and wine sales fell by the most amount since tracking began in 1949. Despite a gain in cooler and cider sales over the prior year, overall alcohol sales had their greatest decline in over ten years.

Despite the drop in sales, the Canadian Council on Substance Use and Addiction issues a study urging people to limit their alcohol consumption to two drinks a week or less because even tiny amounts of alcohol can be harmful to their health. Traditionally, Canada encouraged men and women to limit their weekly alcohol consumption to 15 and 10 drinks, respectively, with anything less being deemed low-risk.

Prabhnoor Kaur