The federal government is maintaining the cap on excise duties for alcohol in Canada after it was set to increase in April, but one Saskatoon distillery was hoping for a little more.
Cary Bowman, president of good times at Lucky Bastard Distillers, a micro distillery in Saskatoon, said distilleries in Canada didn’t have a loud enough voice.
“They came out with this reduction of half the excise tax rate for breweries on the first 15,000 hectolitres. They didn’t do anything for the spirits side of things,” Bowman said.
For an additional two years, Finance Minister Chrystia Freeland told reporters that the federal government will extend its inflation adjustment cap at two per cent for beer, spirit and wine excise duties.
The alcohol excise tax, sometimes known as the “beer tax,” was planned to go up by 4.7 per cent on April 1 this year.
Freeland said Saturday that the federal government will also cut the excise duty rate by half on the first 15,000 hectolitres of beer brewed in Canada, to provide the typical craft brewery with up to $86,952 in additional tax relief in 2024-25.
The tax increase is tied to the Consumer Price Index and automatically goes up in line with inflation. However, that automation was set in 2017, before Canada saw record levels of inflation that in turn caused the tax to skyrocket. In 2023, the tax was set to go up 6.4 per cent but was capped at a two-per cent increase due to industry lobbying.
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Bowman noted he was happy to see the cap on the escalator tax, adding that he was prepping for the upcoming increase.
He opened his business back in 2012 after learning about a resurgence in craft distilleries happening in the United States and his business partner winning the lottery in 2006.
He said there are over 300 distilleries in Canada, but he said they don’t have as big of a lobbying group as brewers.
“We were kind of left off the table. The wineries got their thing, the breweries got their thing.”
He said distilleries use about five to 10 times more agriculture ingredients for their products than breweries and typically hire three to four times as many employees.
“Production costs are incredibly high and it’s getting scary.”
Bowman explained that ultimately it’s the consumer who would end up paying this tax and that it would be built into the price of spirits.
He said he’d like to see taxation reduced on alcohol in Canada that was consistent regardless of what type of alcohol was being produced, as well as allowing them to be more competitive against international producers.
Brad Goddard, chair of the Canadian Coalition of Independent Craft Brewers, said about 63 per cent of Canada’s craft brewers under the 15,000-hectolitre mark aren’t profitable and that they’ve been trying to suggest ways for the federal government to make them profitable.
He said many breweries in Canada don’t have buying power.
“That is exacerbated by the fact that Canadians don’t want to pay more for their beer,” Goddard said.
He said the price of beer hasn’t gone up as much as other commodities like meat and cheese has, adding that beer has a hard time passing on cost.
“It’s seen as that affordable luxury, and ‘affordable’ has a price limit.”
He said these changes from the feds can mean that some breweries can hire another person during the busy summer season.
Goddard also said he’d like to see a little more from the feds, suggesting that the 15,000-hectolitre mark should be pushed further back, saying the taxation is steep for anything beyond that and that this would allow breweries to grow more.
“North of 15,000 hectolitres you get a nosebleed, now we’ve created a bit of a cliff. And I’d like to see that smoothed out over a longer period of time.”
— with files from Naomi Barghiel
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