According to the government of Canada’s website , the excise tax, which is a tax determined by the amount of beer a brewer produces, will be tied to inflation and increase every year.
For small breweries, the tax will hit hard. Ken Woods, the President of Black Oak Brewing Company said that “unfortunately, when the taxes go up, there isn’t much we can do… It looks like we could be doing a price increase to cover those taxes.”
Woods founded Black Oak in 2000 and has been president of the brewery since its inception. The brewery primarily makes ales and stouts but also makes wheat beers, lagers, porters and seasonally inspired beers.
“I can’t absorb those tax increases. I have done that in the past and it really hurt my bottom line,” Woods said. He said “anytime something goes up, either ingredient costs or tax, those costs are passed on to the consumer.”
Woods said that prior to 2002, Ontario’s beer taxes were the third highest in the world. However, the tax model was changed after lobbying by the beer industry to change it into a tiered system. With this system, breweries are taxed based on what tier they fall into, which is determined by how much beer they produce.
This made it much easier for small breweries to survive and thrive. The tiered system “has basically prevented me from going bankrupt,” Woods said.
Although the craft beer industry in recent years has been growing rapidly, he said he fears that the new tax will create a barrier to entry for new craft brewers and make it more difficult for established brewers to thrive.
Woods said that this increased tax could turn people away from beer completely. “There will be some people, who will just not accept it, and they just won’t drink beer from anybody,” he said.
In response to this tax, Beer Canada has launched a campaign called “Axe the Beer Tax” and is urging the federal government to not implement the new tax.
Luke Harford, the president of Beer Canada, said that they launched the campaign to “engage all brewers and any Canadian concerned with [annual tax increases].”
He said that when taxation increases yearly, the government doesn’t look at the health of the industries it affects and whether it’s having negative effects on those industries.
Harford worries that the government “has put in place a mechanism that allows it to increase taxation every year without ever having to talk about it, debate it, or explain to Canadians why the price of beer is going up every year.”
Although he is concerned with the cost to produce beer in Canada, he said that when it comes to exporting beer, brewers get to reclaim the cost of Canadian production tax and can benefit from the significantly lower production rates in the United States.
While the new tax won’t stop University of Ottawa student Dan Grew from drinking beer, he said, “if beer prices go up, I’ll definitely be buying a lot less.”
He added, “I’ll just have to buy cheaper liquor for social drinking events, and only have a beer occasionally.”