Canada’s federal alcohol tax is set to increase 6.3% on April 1 of this year, its biggest increase in 40 years and one that could hurt restaurants as they recover from the COVID-19 pandemic.
Industry associations are warning that the increase in Canada’s alcohol excise tax could force bars and restaurants across the country out of business.
The tax increase comes as bar and restaurants struggle to recover from pandemic lockdowns, labour shortages, and rising costs due to inflation.
Alcohol excise taxes are imposed at the manufacturing level and adjusted annually based on inflation. This year's increase is more than triple the usual amount due to elevated inflation.
However, Canada’s federal government in Ottawa says that this year’s increase in the alcohol tax amounts to less than a penny on a can of beer.
The excise duty tax is increasing the cost of a litre of wine by four cents.
Alcohol prices rose 5.7% in February compared with a year earlier, according to Statistics Canada.
Restaurants Canada, an industry group, said this year’s tax increase will cost the food service industry about $750 million annually.
A recent Restaurants Canada survey found that about half (50%) of Canadian restaurants are operating at or below profitability.