'It's another employee. It's a marketing budget': Reduced excise tax still hurts small brewers

The federal government will cap the annual alcohol excise tax increase on beer, spirits and wine at two per cent for an additional two years.

That announcement was made Saturday by federal Finance Minister Chrystia Freeland.

The alcohol excise tax had been set to rise on April 1 by 4.7 per cent, tied to inflation, but Freeland said the increase is being capped at the lower rate.

She also announced some tax relief for local craft breweries.

"Specifically, we are reducing the excise duty rate on beer by 50 per cent on the first 15,000 hectolitres of beer brewed in Canada," Freeland said.

"This will provide a typical craft brewery with nearly $87,000 in tax relief in 2024-2025."

But craft brewers find it hard to call it tax relief when the tax is still increasing, just not by as much as first planned.

Cael Tucker, co-owner of Tailgunner Brewing Co., says for small brewers facing shrinking margins, every penny matters and even the smaller tax hike hurts.

"We can't afford it because that turns into $100 a week, (and) thousands of dollars a year," Tucker said.

"It's another employee. It's a marketing budget. It's our merchandise budget. It's new glassware. It's chemicals. It's all these things -- the ebbs and flows of an industry that's very tight on margin as it is."

The federal excise tax is what's known as an "escalator tax," which means it automatically adjusts upward with inflation every year.

Brad Goddard, who chairs the Coalition of Canadian Independent Craft Brewers and is also the vice-president of business development at Big Rock Brewery, says unlike escalators in the mall, this one only goes up.

"Canadian beer tax has gone up a lot higher than beer price has. These alcohol excise taxes are the only ones that go up every year without conversation. They just climb and climb and climb," Goddard said.

Goddard says while the excise tax only amounts to pennies a pint for consumers, it is a heavy burden for producers.

"And so those pennies do add up," Goddard said.

"Beer in Canada, the price of beer, hasn't been going up in lockstep with inflation. However, all of our inputs have. And so, what has happened over the last three years or four years is brewers' margins have shrunk."

The Canadian Taxpayers Federation's Alberta director, Kris Sims, calls the federal backtrack on the tax a "win for democracy."

"This is a win because people spoke up. They should take this as a note that when you email your Member of Parliament, when you phone your Member of Parliament, when you do very peaceful protesting and push back and say, 'Hey, folks, tap this down. We can't afford this,' they listen," Sims said.

Despite that, Sims says governments at all levels continue to take too big a bite out of booze sales.

"About 50 per cent -- half the cost -- of your case of beer is already taxes. It's multi-layered. A bunch of different layers of government have their hands on that cookie jar. But around 50 per cent of the cost of your case of beer -- of your regular beer, or your nice fancy craft beer, anything like that -- 50 per cent of that is taxes. That's already a huge bite out of your wallet," Sims said.

The Canadian Taxpayers Federation would like to see the federal excise tax on all alcohol scrapped completely.

The tax will increase by two per cent on April 1.