Ottawa restaurateurs brace for federal alcohol tax increase in April

In just a few weeks, consumers may notice a spike in alcohol prices as the federal government plans to increase the alcohol excise tax by 4.7 per cent in April.

This move comes at a challenging time for many businesses still struggling from the effects of the pandemic.

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Local restaurants like Lil Z's Pizza in the ByWard Market anticipate the impact of this tax hike on their operations.

Assistant general manager Johnny Bonney says, "We make our living on nickels and dimes. You know, those margins are so thin that anything that cuts into that is always a bit of a threat to that bottom line."

The federal tax increases annually by the rate of inflation. Restaurants Canada is calling for a two per cent cap on the increase.

Max Roy, VP Federal & Quebec at Restaurants Canada, highlighted the challenges faced by many operators.

"Right now, we're at 63 per cent of operators that are barely breaking even," says Roy. "So they don't really have a choice that they have to pass it on to the customer."

Paul Meek, owner of Kichesippi Beer, is also concerned about the timing of the tax increase, emphasizing the current struggles within the industry.

"The industry is struggling right now. And an extra tax increase is only making it harder on the whole industry," says Meek. "I have a couple of options. I can absorb the hit and make, you know, 4.7 per cent less; I can take a similar small amount where I absorb some of it and increase our prices; or I can increase the whole thing. And then now that makes the restaurants more expensive, and then they charge the food of the customer."

While the Doug Ford government recently announced a two-year provincial tax freeze on beer and wine to support small businesses, the federal tax increase still presents a significant challenge.

"Numbers are nowhere near where they were pre-pandemic," says Bonney. "People just aren't coming into restaurants."

Meek added, "We know that taxes are important to help the government flow through, but this is definitely hurting a struggling industry at this time."