Joint Open Letter to Minister Freeland RE: Alcohol Escalator Tax

Joint Open Letter to Minister Freeland RE: Alcohol Escalator Tax

October 30, 2020
Hon. Chrystia Freeland, P.C., M.P.
Minister of Finance
90 Elgin St, Ottawa, Ontario
K1A 0G5

Dear Minister:

On behalf of the hundreds of thousands of businesses of all sizes across the country affected by the COVID-19 health and economic crisis, thank you for your continued engagement with and responsiveness as we continue to try to mitigate the devastating impacts of the pandemic on businesses and their employees.
We are writing on behalf of Canadian restaurants and the hospitality industry, agricultural and other supply chain members, alcohol producers and consumers to ask that Finance Canada repeal the alcohol escalator tax in the government’s upcoming update to Canada’s COVID-19 Economic Response Plan. The escalator tax is an automatic increase to excise duties that has gone up four times in the last three years and is scheduled to increase again on April 1, 2021 further driving up the price of beverage alcohol for consumers and businesses that are struggling.

Canada has some of the highest alcohol taxes in the world. On average, 47 per cent of the price of beer in Canada is from federal or provincial taxes. Approximately 65 per cent of the price of wine is due to taxes and on average 80 percent of the price of spirits is taxes. The escalator tax increases that tax burden every single year on April 1.

The pandemic has resulted in a collapse in bar and restaurant sales for all beverage alcohol. Another increase to the escalator tax will increase hospitality industry costs, affecting their ability to attract customers and retain employees while they try to survive and recover from government-imposed shutdowns. As new indoor dining restrictions are implemented in various parts of the country and patio season ends, tens of thousands of restaurants and bars are in danger of closing their doors permanently. An increase in excise duties will also hurt Canadian brewers, wineries and distillers who will lose access to much-needed capital that they would otherwise invest in their operations, employees and products as they try to navigate the huge losses of sales to restaurants and bars.

When the escalator tax was first introduced, we expressed concern that a permanent automatic increase in duties every year was not warranted given Canada’s exceedingly 2 high alcohol tax rates. We also believe that the escalator shields tax increases from necessary parliamentary scrutiny and approval and that the rigid and automatic nature of the escalator does not allow the government to account for economic circumstances such as those we are experiencing right now.

Now is not the time to increase alcohol taxes on middle-class Canadians, our struggling restaurants and bars and domestic alcohol producers. Our request is that you repeal the escalator tax through the fall update to Canada’s COVID-19 Economic Response Plan or the next federal budget. At a minimum to support Canada’s economic recovery, the escalator tax increase should be frozen so it does not increase excise duty rates on April 1, 2021.

Thank you for your continued efforts to support Canadian businesses and their employees.

Sincerely,

Hon. Perrin Beatty, PC, OC
President & CEO
Canadian Chamber of Commerce