Canada’s alcohol industry dates back centuries, and the government’s role in controlling it has changed drastically throughout the years. The liberal government over the last several years has established policies to artificially inflate the price of alcohol and keep it there via taxes. To encourage more responsible drinking, the government may now impose tariffs on alcoholic beverages and place limits on their availability.
Canada’s alcohol tax was not instituted by the Liberal government. Many changes have been made to the federal excise tax since its inception in 1927. While the federal government still collects taxes on alcoholic beverages, it has given pricing discretion to the provinces in recent decades.
To prevent underage drinking and increase revenue, the federal government has frequently increased the excise price on alcohol. Excise taxes on booze are commonplace at the national level. Two major types of alcohol taxes are “specific” taxes and “ad valorem” taxes. Specific taxes have a fixed monetary value per litre, in contrast to ad valorem taxes like the Goods and Services Tax (GST) and the Harmonised Sales Tax (HST). Most of the federal excise tax on alcoholic beverages comes from ad valorem taxes, which are calculated as a percentage of the retail price.
Over the last decade, the Liberal government has frequently raised alcohol prices to raise revenue and discourage use. In 2016, the federal government increased alcohol taxes by $75 million per year. Previous increases in alcohol taxes in 2012 and 2015 brought an extra $220 million to the federal government.
The Liberal government has increased alcohol tariffs to further limit access, particularly among youth. The rationale for imposing more taxes on alcoholic beverages is that doing so will lead to less excessive consumption across the board. Minimum pricing control for alcoholic beverages has also been established by the federal government. The selling of alcohol at pricing that might encourage binge drinking is restricted.
When it comes to alcohol, provincial laws are often stricter than federal ones. Some provinces’ governments set the price of alcohol, while others need a minimum price to prohibit sales at below-market prices. Moreover, a number of states and provinces have implemented systems where alcohol prices are linked to inflation, leading to gradual rises over time.
Canada’s alcohol prices have stayed unnaturally high due to a combination of laws and taxes. Because of federal and provincial taxes, the cost of alcoholic beverages has stayed higher than it otherwise would be. Beer, wine, and spirits are expensive in part because of minimum pricing mandated by provincial governments and the indexing of prices to inflation in certain regions.
The Liberal government as a whole has passed many measures that keep alcohol prices high in Canada. To generate revenue, the federal government has frequently increased taxes on alcoholic drinks and has instituted a minimum price to restrict sale of alcohol at below-market prices. The provincial government has taken further efforts to restrict the selling of alcohol at prices below production costs. Because of regulations and taxes, the cost of alcoholic beverages in Canada is far higher than it should be.