Excise tax tied to inflation should be axed for good, say B.C. brewers, wine producers

Producers of wines, beers and spirits in B.C. say while they welcome the federal government's decision to cap alcohol excise tax increase at two per cent for the new fiscal year, they would rather have it removed.

In the federal budget released Tuesday, Ottawa temporarily capped "inflation adjustment for excise duties on all alcoholic products at two per cent" for a year, starting April 1.

In 2017, Ottawa decided to tie excise tax on alcoholic beverages to inflation — called "escalator tax" — to make tax hikes more predictable. But high inflation over the last year pushed the excise tax increase to 6.3 per cent, the highest increase in history.

Tyler Dyck, president of the Craft Distillers Guild of B.C., is among alcohol industry professionals lobbying for a cap on the excise tax raises.

He said it's a "lazy taxation policy" to automatically raise excise tax based on inflation, which he argues has made B.C. and Canadian alcohol products less competitive compared to those from other G7 nations.

"We have increasing escalator taxes that go on unchecked when all of our trading partners have axed their excise for their domestic producers entirely," Dyck told host Chris Walker on CBC's Daybreak South.

According to Sylvain Charlebois, professor of food distribution and policy at Dalhousie University, Canada has surpassed Japan with the highest tax rate on alcohol in the industrialized world, charging taxes that account for around 50 per cent of the price of beer, 65 per cent of the price of wine, and 75 per cent of the price of spirits.

Dyck says alcohol producers in B.C. have been frustrated with the automatic increases in excise taxes every year, and he hopes they can be raised in a "respectable and responsible manner" after this fiscal year.

Miles Prodan, president and CEO of Wine Growers British Columbia, an industry association representing about 200 wineries across the province, says the current excise tax cap is a "victory to some degree," but he hopes the federal government would eventually remove the escalator tax on Canadian wines.

"You're just capping it two per cent this year, it's fine for this year, but what happens next year and the year after that and the year after?" he said.

Prodan adds that B.C. wine growers are conscious about the impact of the excise tax, but are reluctant to automatically pass on additional costs to customers.