Here’s how Canada’s alcohol tax hike will impact Ontario

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The price of alcohol is set to rise in less than a month with a tax increase on tap for Ontario, along with the rest of the country.

A 6.3 per cent federal tax on beer, wine and spirits will go into effect on April 1.

This excise tax automatically climbs every year in accordance with the rate of inflation. When it was introduced in 2017, the federal tax on alcohol rose by two per cent.

The Liquor Control Board of Ontario (LCBO) said that their prices are based on a variety of factors: the supplier’s price plus federal import and export duties, freight, levies, a standard mark-up, HST and container deposit.

“Our suppliers set their own pricing (subject to minimum retail prices) and have the option to adjust their pricing up or down throughout the year in response to currency fluctuations, federal taxes or freight rate changes, or price changes by their competitors,” an LCBO spokesperson said.

Retail price increases are determined by alcohol producers, the provincial liquor board explained. Meaning, price hikes that come into effect on April 1 at Ontario liquor stores will vary product-by-product.

“What we are forecasting is if this goes ahead, the price of a 12 pack in Ontario, given everything going on, would go up about 10 per cent,” CJ Hélie, President of Beer Canada, said. That increase would be due to a compilation of cost increases across the board for the beer sector, including the price of barley, corn and transportation, alongside the tax.

“It would be more of a gradual thing,” Hélie said about the potential price hike. “That sticker shock is too much. Breweries would look to do it in increments throughout the year.”

In an effort to avoid that scenario, he is pushing for a freeze on the tax until inflation returns to Canada’s two per cent target. “It’s just the worst time to pile on and make things worse,” Hélie said, pointing to the rough patch of pandemic years when the hospitality sector shutdown, dragging sales down by about 3.5 per cent last year.

Advocacy for the tax freeze comes as a new report, funded by Health Canada, found consuming more than two drinks per week constituted a moderate health risk due to evidence linking alcohol to cancer. These guidelines marked a significant change from the previous understanding that men could have up to 15 drinks per week with low risk, and women up to 10.

Restaurants Canada, a national not-for-profit association representing the industry, is also calling for a deferral of the upcoming federal tax increase in order to grant food and beverage businesses more room to “absorb another tax increase at this vulnerable time,” the organization said earlier this week.

Canada’s Chamber of Commerce has called on the federal government to repeal the automatic tax increase or at minimum, freeze it.

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