Prices for beer might rise in the near future as the cost of making it is rising due to a federal excise tax.
The Canadian Craft Brewers Association (CCBA) has received news that the federal excise tax on beer will increase by 6.3 percent as of April 1.
Beer is heavily regulated and taxed and excise is the federal tax portion on beer. The tax brackets are set based on the volume of beer that’s produced.
“Canadians across the country are already feeling the pinch caused by the current inflationary crisis, and craft breweries are no exception. The cost of everything that goes into producing Canadian craft beer has gone up, including hops, barley, and aluminum cans,” says Christine Comeau, Executive Director of the CCBA. She adds that the cost of literally every aspect of making beer including energy, transportation, labeling, etc. has increased, in some cases by 30 to 50 per cent.
This federal excise tax is an annual tax rate that usually increases one or two per cent annually with inflationary cost. Comeau says this increase of 6.3 per cent is the highest tax hike the industry has ever seen.
“Brewers can only really absorb so much. Right now they’re hurting and to survive it’s going to mean that the cost of craft beer is likely going to go up. By how far, that’s yet to be seen,” says Comeau.
Canada has roughly 1,100 craft breweries with 55 per cent of them being located in rural areas, making up roughly 21,000 jobs.
“The vast majority of Canadian craft breweries are less than five years old, and most are not yet profitable. These small businesses are already struggling with inflationary costs and another tax increase will make it difficult for some to survive,” says Comeau.
The CCBA, in partnership with the Coalition of Canadian Independent Craft Brewers, is recommending that the federal government introduce progressive, revenue-neutral, federal excise rate schedule for beer to promote growth for independent Canadian breweries. This new schedule would introduce lower rates for those at the lowest volume tiers to help breweries become profitable. Also, to extend rates for a longer period of time before the maximum tax is reached.
“It’s time for the federal government to modernize the Excise Act, one of Canada’s oldest pieces of legislation. Craft breweries cannot wait any longer, especially as the government is set to introduce a record-breaking tax increase on April 1,” says Comeau.
Comeau says local breweries should reach out to their local Member of Parliament to stress the issue and the need for the modernization of the Excise Act and the need for better solutions.
“It’s time to ensure that Canada’s craft breweries can continue to be a vehicle for middle-class job creation which supports a more prosperous, more inclusive, more sustainable, and more resilient economy in rural and urban communities from coast to coast.”