Area's brewers brace for beer tax hike

As local brewers work to regain their pre-pandemic footing, they’re preparing for another potential hit.

Having been tied to inflation several years ago, federal taxes on beer sales are set to rise by 6.3 per cent on April 1.

It doesn’t have to be that way, say local brewers and industry spokespeople. They’re calling on the government to scrap the hike and hold taxes at their current levels until inflation settles down.

“I think it’s going to hurt breweries at a time when they’re already struggling,” commented Brad McInerney, marketing manager at Wellington Brewery. “It’s been a challenging time for a lot of small businesses.”

“The sting is pretty strong considering we’re dealing with price increases across the board,” added Jon Laurencic, co-founder/co-owner of Elora Brewing Company. “Having this come up as well, it’s a little bit frustrating.”

Federal taxes on beer sales are set to automatically rise by 6.3 per cent – the largest single increase in more than 40 years – having been tied to the rate of inflation through legislation passed in 2017.

At the time, explained Beer Canada president C.J. Hélie, there had been several years in a row of one to two per cent inflation, which he indicated was “manageable” for the industry, though the association didn’t support the idea of automatic increases then or now.

“Parliament should have a vote on these things,” he said. “It’s just such a challenging period for the hospitality sector and here they are, the government, instead of helping is going to make things worse.”

The increase, Hélie said, would result in a $45 million jump in collective beer tax revenues.

“We’re hoping the government listens,” Laurencic said of the requested tax freeze. “Every brewery in Canada is going to get hit with this.”

While ingredient, packaging and transportation costs have risen significantly the past two years, that hasn’t been passed along to customers, said Laurencic and McInerney, noting it’s too early to predict if that trend will continue.

“That’s a really difficult thing in a challenging market,” said McInerney, pointing not only to the presence of several local breweries, but international corporate interest in acquiring smaller brands, such as the recent purchase of Waterloo Brewing by Carlsberg.

Given efforts to axe the increase – something that has support from the Canadian Chamber of Commerce and opposition parties in Ottawa – it’s difficult to predict what the fallout of the planned tax hike may be.

“Hopefully it doesn't have a large impact on sales,” Laurencic said.