Federal Government's Proposed Alcohol Product Increases
On behalf of our hospitality industry, ORHMA has been advocating against Ontario's Beer Tax hike. This past week, we have been informed that government has taken our recommendations into consideration and the Ministry of Finance will further defer this tax. Now, ORHMA is supporting the fight on the federal government’s proposed alcohol product increases which would impact all beverages with alcohol. On April 1, 2023, liquor in Canada will cost 6.3% more as a result of to an alcohol tax hike implemented by the federal government. The increase is due to an annual escalator excise tax implemented in 2017. The escalator tax allows the federal government to automatically raise taxes on alcohol in response to inflation.
Tony Elenis, President & CEO of ORHMA was asked several questions by media on this concerning taxes:
What do you think of the way alcohol is taxed in Canada?
Embedded in the full retail price of beverage alcohol is a complex regime of fees, levies, markups and taxes, both Federal (e.g. Excise or Customs Duties and GST) and Provincial.
The beverage alcohol pricing including inflationary indexation should not differ from other goods and services offered. Its an archaic system stemming out of prohibitionary thinking and all stakeholders involved are penalized in order to provide tax revenue to the various government levels.
Do taxes factor into how businesses set price points for their products?
Absolutely.- though licensees might vary in their pricing structure when calculating their “mark up price” the total cost of the product determines the selling price. These taxes are embedded in the total price and are considered in menu pricing calculations.
What do you think about the upcoming alcohol tax hike taking place in April?
Beer taxes in Canada are among the highest in the world operating with rigid archaic controls. While businesses selling beverage alcohol have been devasted throughout COVID-19 they are now finding it tough to stay afloat due to high inflation, supply chain issues , critical workforce shortages and debt all are adding financial pressures. During the pandemic government taxes from beverage alcohol have kept up due to the consumer shift in home consumption from retail outlets. On a per liter basis government revenues continue to support their revenues. This is not a time for these taxes to increase. We are calling for a freeze on the Excise Taxes.
Do you think the tax hike will change the way consumers purchase alcohol?
In these current inflationary times when consumers are starting to scrutinize their spending including restaurant visitation it will have an impact due to higher pricing at the selling point.
How might the tax hike affect businesses in the restaurant and hospitality industries?
The restaurant sector is in a volatile period and needs a helping hand. Restaurants are having a tough time to mitigate unprecedented inflationary costs. Menu price increases are impacting consumer consumers especially with the trend in cutting back disposable income. Tax hikes here are government induced burden and will only add more pressures.