Canadians Will Soon Be Hit With One of the Highest Alcohol Tax Increases Ever, and many are not happy about it. The increase, set to begin on April 1, will see taxes rise by 6.3%. This has been called the largest alcohol tax increase in 40 years by Restaurants Canada and the highest increase ever by Retail Insider.

Canadian Drinkers Massive Alcohol Tax Hike Coming Soon
Massive Alcohol Tax Hike Coming Soon

Critics argue that the government should not be increasing taxes on the industry when it is still recovering from the impact of Covid-19 and with inflation continuing to rise. Beer Canada, for example, says that “the last thing Canadians need is another beer tax increase,” especially with sky-high inflation pushing up the cost of food, gas, and housing.

The escalator tax system, which indexes alcohol taxes to inflation, was introduced in 2017 under the leadership of Prime Minister Justin Trudeau. However, Retail Insider points out that Canada already has the highest alcohol taxes compared to other countries such as France, Germany, Italy, Japan, the United Kingdom, and the United States.

Moreover, a peer-reviewed report in 2021 found that government taxes account for between 20% and 30% of the price of alcohol, not the 80% claimed by some distillers. Nonetheless, this is still a significant amount, and the report highlighted that the current escalator tax system is ineffective, calling for a volumetric tax instead.

The volumetric tax system increases taxes on higher alcohol-by-volume (ABV) alcohol, which could stifle competition since craft distillers and other alcohol producers often use higher ABVs to produce unique products that stand out from large producers.

As brought out above ,Starting April 1, 2023, the cost of liquor in Canada will increase by 6.3%, which has raised concerns among local businesses and residents. The average adult in Alberta reportedly spends $808 on alcohol, which would cost an additional $50 per year with the tax increase. The higher tax rate is expected to make it difficult for small businesses to compete with larger commercial businesses, which can offer better prices on larger orders.

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Additionally, the Canadian Centre on Substance Addiction has lowered the “low-risk” classification of alcohol consumption from a maximum of 15 drinks per week to two, which has led to concerns about the negative health effects of alcohol consumption. However, higher alcohol prices have been proven to lead to lower consumption and ultimately reduce the harms associated with alcohol.

Pro/cons of decision by the Canadian government to increase alcohol tax.

The recent decision by the Canadian government to increase alcohol tax by 6.3% has sparked a debate regarding its potential impact on both the community and the industry. While some argue that the tax hike will benefit the community by reducing alcohol consumption and related harms, others argue that it will hurt the industry by driving consumers towards cheaper alternatives. In this argument, we will examine both sides of the issue and evaluate the pros and cons of the increase in alcohol tax.

Pro argument:

One of the primary reasons for increasing alcohol tax is to reduce alcohol consumption and related harms. According to the Canadian Partnership Against Cancer, higher alcohol prices lead to lower alcohol consumption, which in turn can reduce the harms associated with alcohol, such as cancers. The World Health Organization has also recommended higher taxes on alcohol as a means of reducing alcohol consumption and related harms. Therefore, the increase in alcohol tax can be viewed as a positive measure towards improving public health.

Furthermore, the revenue generated from alcohol taxes can be used to fund various public health initiatives and programs, such as addiction treatment and prevention programs, which can benefit the community. By reducing the overall burden of alcohol-related harms on the healthcare system, the tax increase can free up resources to be directed towards other public health priorities.

Con argument:

On the other hand, some argue that the increase in alcohol tax will hurt the industry, particularly small businesses. Higher taxes can lead to increased prices for consumers, which can drive them towards cheaper alternatives, such as larger commercial businesses. This can have a disproportionate impact on small businesses, which may struggle to compete with larger competitors due to their inability to get better prices on larger orders.

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Additionally, some argue that the tax increase may not necessarily lead to a reduction in alcohol consumption. Rather, it may simply result in a shift towards cheaper, lower quality products, which can be even more harmful to consumers. This can have unintended consequences, such as an increase in alcohol-related harms and a reduction in the quality of alcohol products.

Evaluation of pros and cons:

Overall, the increase in alcohol tax can be viewed as a positive measure towards improving public health and reducing the burden of alcohol-related harms on the healthcare system. The revenue generated from the tax increase can be used to fund various public health initiatives and programs, which can benefit the community. However, it is important to consider the potential negative impacts on the industry, particularly small businesses. The government may need to consider implementing measures to support small businesses, such as providing tax breaks or other incentives.

It is also important to note that the effectiveness of the tax increase in reducing alcohol consumption and related harms may depend on a range of factors, including the level of the tax increase, the quality of alcohol products, and the availability of cheaper alternatives. Therefore, ongoing evaluation and monitoring may be necessary to ensure that the tax increase is having the desired effect on public health.

In conclusion, the increase in alcohol tax by the Canadian government is a complex issue that requires careful consideration of both the pros and cons. While the tax increase can benefit the community by reducing alcohol consumption and related harms, it may also have unintended consequences for the industry. As such, a balanced approach that considers the needs of both the community and the industry may be necessary.

Will Canadian government listen to public?

It remains to be seen whether the Canadian government will listen to public concerns or move ahead with the tax increase regardless. Regardless, Canadians will soon be facing one of the highest alcohol tax increases ever, which is sure to leave a sour taste in the mouths of many.

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