Local breweries and restaurants were in the midst of preparing for one of the highest alcohol excise tax hikes in decades when the government announced recently they’d be capping the increase at two per cent for a year.
Tax on beer, spirits and wines were initially supposed to increase by 6.3 per cent on April 1.
Collin McKinnon, owner of Farm League Brewing on Ainslie Street, knew taxes were going to increase but is happy that the government took the concerns of businesses seriously.
“I was disappointed (by the 6.3 per cent increase) but felt it looming ever since the discussion of a recession started,” McKinnon said.
“It’s nice to know that they listened to feedback from the industry.”
Saving on the 4.3 per cent is certainly a positive, but McKinnon points out that the federal tax is merely a small portion of the overall tax businesses pay on alcohol products.
“It's worth mentioning that federal beer taxes are a fraction of the provincial beer tax we pay,” he said.
“The provincial beer taxes have done more damage to the industry than any rising costs or inflation.”
Given Farm League has only been open for just over a year, McKinnon says his business hasn’t had to deal with some of the trying times others have but wants to make sure he’s not caught off guard in the future.
To do so, he’ll be taking a slightly more conservative approach, without passing the costs onto the consumer.
“It’s one of the hard parts of being in business,” he said.
“You enjoy the good times when the economy is good but you have to be prepared for the other side of the coin. In the future the goal will be to save during the good times to prepare for rainy days. The best you can do is try and find efficiencies in production and ingredient sourcing. We're prepared to do whatever it takes to not price out our customers.”
The excise tax is typically tied to the rate of inflation, but a temporary cap was needed for a number of reasons says Cambridge MP Bryan May.
“The effects of the COVID-19 pandemic and the Russian invasion of Ukraine are still being felt in the cost of ingredients and manufacturing delays,” May said.
“This shows in the lower-than-expected monthly results this year. The one year cap at two per cent moves the excise tax forward in tandem with the needs of businesses and manufacturers. The wine, beer, and spirit industries in Canada asked our government to address the increase and this revised figure is a result of myself and my colleagues advocating for a temporary pause on the full increase.”
What happens a year from now remains to be seen but May feels the government will continue to work with businesses to determine the most appropriate next steps.
“I'm in support of any system that fairly taxes goods and services and also works in harmony with businesses and industries,” he said.
“Our government is going to continue to work with Canadian wine, beer, and spirit producers and ensure that Canadians can enjoy these products in moderation.”