Frustration Brews Over Alcohol Tax Hike: Here’s What to Expect
The cost of wine, beer, and spirits is rising across Canada. Consumers and producers weigh in on the tax hike as we track down the cheapest way to buy booze on a budget.
Canadian liquor tax hike of 6.3% coming in April
As of April 1, 2023, a federal excise tax will raise the cost of alcohol across Canada by 6.3%. The tax was introduced in 2017 by then finance minister Bill Morneau. It’s colloquially called the alcohol escalator tax, as it automatically adjusts every April 1, based on the Consumer Price Index.
When inflation hangs out around the 3% benchmark targeted by the Bank of Canada, the alcohol tax isn’t particularly noteworthy. But throw the white-hot inflation rates of 2021 and 2022 into the mix, and you’ve got a tax hike akin to sprinkling salt in an open wound.
Consumers may stay in or buy in bulk
Unsurprisingly, Canadians aren’t happy about the tax hike. This means future trips to the liquor store won’t be business as usual.
Amber Morin, a 46-year-old Vancouver Island resident and beer consultant for the website, Raincoast Brews, says she’s already begun to get more strategic about how and where she buys alcohol. “I’m more inclined to buy in bulk,” Morin says. “If I’m going to buy beer, I’ll buy 24 so that it’s cheaper per unit, and I can make it last longer.”
Morin also anticipates a consumer shift toward staying in rather than going out. “People will just make their cocktails at home,” she says. “The restaurant industry is already suffering so much. I think this is just going to hurt those small businesses even more because they’ll have less clientele.”
Morin makes a good point. April’s tax hike doesn’t just hurt consumers. With people potentially spending less or staying at home, those who produce and distribute alcohol may have a challenging year ahead.
Alcohol taxes put stress on small businesses
Provincial liquor taxes vary, but you’d be hard-pressed to find a business owner who thinks they should be paying more to sell alcohol.
“Each tax hike just puts more stress on our business,” Steve Himel, founder and general manager of Henderson Brewing Company in Toronto, said in an email. “This year, we saw many of our input costs go up. It has been really difficult to eat those costs, and a tax increase will just make it that much harder to run our business.”
Himel also points out that the tax hike will disproportionately affect smaller businesses, suggesting big breweries can rely on automated processes and cheaper ingredients.
This tax hike comes at a tough time. Pandemic-driven stay-at-home orders, supply chain hiccups, sky-high inflation rates — they’ve all taken their toll on businesses that produce and distribute alcohol.
“The restaurant industry is in a critical state of affairs right now,” says Tony Elenis, president and CEO at Ontario Restaurant Hotel and Motel Association. In addition to pandemic and inflationary pressures, Elenis points out the increasing cost of retaining staff in a competitive job market. “Many restaurants have closed sections in the restaurant, have changed hours of operation — perhaps closed one day a week — in order to be able to cope,” says Elenis.
The bottom line? Whether you distill it or sip it, paying more for alcohol in the spring will be tough to swallow.
Get strategic about where and how you buy alcohol
There are numerous ways to save on liquor, like skipping the premium label to grab a lower-shelf bottle or taking advantage of duty-free discounts (when the opportunity arises). You may also want to consider buying in bulk.
Amber Morin says she has already noticed the shift in the way consumers purchase alcohol. “Instead of buying a bottle of wine, they’ll buy a box,” says Morin. “Because it lasts longer. And it’s less cost per unit.”
Alcohol typically costs more at restaurants and bars, so get strategic about how and where you spend your money on a night out. Plenty of restaurants offer drink specials and discounts to incentivize folks to visit, especially mid-week when sales tend to be slower.
The last factor to consider when purchasing alcohol is where your beverage comes from. This tax hike — and all the business challenges that have preceded it — won’t hit all establishments the same. It may be cheaper to frequent big restaurant chains and breweries, but your patronage may be more impactful at a mom-and-pop shop.
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Shannon Terrell writes for NerdWallet. Email: email@example.com
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