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Federal Excise Tax Increases: Some Good News, Some Challenges

In March 2024, the Canadian federal government decided to cap the annual increase of the alcohol excise tax at 2% until 2026, diverging from the initially planned increase of 4.7%. This decision was influenced by concerns about the economic pressures facing consumers and businesses, particularly in the hospitality sector, amid a challenging inflationary environment. This cap was introduced to provide some financial relief and stability for businesses within the industry, including small distilleries and breweries, which are significant contributors to the economy​.

In 2017, the federal government instituted the alcohol escalator tax in Canada, officially known as the "escalator clause." The clause is a mechanism that automatically increases federal excise taxes on alcohol each year. This tax policy adjusts the excise taxes on alcohol products like beer, wine, and spirits in line with the rate of inflation. The feds have had to step in several times since the alcohol escalator tax was introduced due to aggressive inflationary pressures which would have seen huge increases year-over-year.

While the two-year cap is welcome news for the homegrown liquor industry, there are some serious inequities in what the feds announced. Specifically, Minister of Finance Chrystia Freeland announced a 50% reduction of the excise tax on the first 15,000 hectolitres of beer produced by craft brewers. Unfortunately, not such relief was offered to distillers. An issue that the Canadian Craft Distillers Association jumped on immediately. And so did ACDA.

In April, ACDA met with senior officials in Minister Randy Boissonnault's office. As the cabinet representative for Alberta, his team is tasked with bringing the concerns of Alberta businesses forward to the cabinet table. The purpose of the meeting was to present a request to the feds that would expand the relief program for brewers to craft distillers. Minister Boissonnault's team is coordinating a meeting with policy analysts in the Ministry of Finance to address this issue. We hope this meeting will take place in the coming weeks and that this was a simple oversight by the Government of Canada. One that can be rectified quickly for our members.

More to come as this process unfolds...

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