Ottawa's alcohol tax another challenge for hospitality industry

Alicja Siekierska
·3-min read
Ottawa's alcohol tax another challenge for hospitality industry
Ottawa's alcohol tax another challenge for hospitality industry

Larry Issac, president of the Toronto-based Firkin Group of Pubs, has many things on his mind.

The summer season was a challenging one for his chain of restaurants, and the second wave of the coronavirus pandemic is only bringing more uncertainty, particularly as the province considers reverting some regions back to Stage 2. There are also questions about the government’s plan for commercial rent relief after the previous program expired this week.

In addition to the pandemic, there’s a federal alcohol excise tax that’s scheduled to increase next year, a move Issac says will make recovery even more difficult. While the tax is on producers, he expects it will increase his costs as well as prices for consumers.

“The restaurant industry is challenging on a good day,” he said in an interview.

“When taxes come on the table that keep being pushed up and up, it becomes very expensive to make a buck and limits our ability to make it affordable for the consumer.”

The Canadian Chamber of Commerce has launched a campaign urging the federal government to roll back the excise duty rate on alcohol that is scheduled to increase on April 1. Prime Minister Justin Trudeau’s government introduced the sin tax on beer, wine and spirits in the 2017. It is scheduled to automatically increase each year on April 1 by two per cent.

Ryan Greer, senior policy director at the Chamber of Commerce, said the campaign was launched now in the hopes that the government would consider repealing the tax as part of its economic recovery plan. Since the tax was introduced through legislation, the government could repeal it through a budget or fiscal update.

“Producers had said that there was risk of having this increase without accounting for economic conditions, and lo and behold, here we are a few years later in a position where the restaurant industry is going through an incredibly devastating crisis,” Greer said.

“So we’re saying that now is really not the time to continue to increase the costs of alcoholic beverages. Now would be the time for the government to freeze or repeal this escalator altogether.”

The restaurant industry has been devastated by the coronavirus pandemic. According to Restaurants Canada, an industry lobby group, 800,000 foodservice workers were laid off or furloughed at the height of the pandemic. Employment has since recovered, the group says, but is still 21 per cent below the employment levels seen before the pandemic.

While Greer said it is difficult to quantify the cost of the tax on all beer, wine and spirit producers (as the tax is calculated at various rates for different products) he expects that it will lead to increased costs for producers, restaurants and bars and consumers.

“At the end of the day, it’s going to be passed down to the consumer, whether you’re buying a bottle on your own or getting a drink at a restaurant,” he said.

The Chamber of Commerce is not alone in its campaign. Ontario’s chamber of commerce released a report this week urging the province to expand online alcohol sales, cut taxes for some wine producers and bolster efforts to curb social harms as it liberalizes booze laws.

Jan Westcott, the chief executive officer of lobby group Spirits Canada, estimates that the taxes cost spirit producers $50 million a year. He says those funds could instead be reinvested in the industry to market Canadian products and make them more competitive abroad.

“You don’t kick somebody when they’re down. It seems like the federal government is kicking all these businesses when they’re already down due to the pandemic,” Jan said.

“Now is not the time to be jacking up prices. Everyone’s struggling. The Prime Minister said they were not going to increase taxes, and yet they’re increasing taxes.”

With files from the Canadian Press

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