Federal government capping excise tax on alcohol after outcry

The 2023 federal budget includes a major win for the beer, wine and spirits industries.

The increase in excise duties on all alcoholic products is being temporarily capped at two per cent starting next month instead of a planned 6.3 per cent increase.

"This proposal temporarily caps the inflation adjustment for excise duties on all alcoholic products at 2 per cent for one year only as of April 1, 2023," reads the budget.

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It's a government concession after microbrewers and distillers said the higher excise tax would affect their bottom lines, already hurt by the higher cost of ingredients, manufacturing and other expenses.

Opposition parties had also been clamouring for the move, and passed a motion earlier this month calling on the government to scrap the increase altogether. The motion called the tax increase the largest on alcohol in the last 40 years.

The president of Beer Canada, which represents Canadian brewers, said in a statement he was "grateful" the government is reducing this year's excise tax increase.

"Faced with already very high tax rates, increased operating costs and depressed beer sales volumes, a 6.3% federal beer tax increase this year would have been devastating to brewers, brewery workers, the hospitality and tourism sector and hard-working Canadian consumers," CJ Hélie said in a statement.

"We are appreciative that Minister Freeland’s took action to provide the sector some breathing room to recover."

Alcohol excise duties are automatically indexed to inflation at the start of each fiscal year, hence the planned 6.3 per cent rise this year.

 

The two per cent cap is just for the 2023-24 fiscal year, the government says. After that, it's possible that inflation will have fallen, meaning the excise tax won't be as punishing.

The government expects to make $100 million in 2023-24 from the excise tax, the documents show.