How will increase in alcohol tax effect Canadians
Most of Canadians have heard of new alcohol tax coming this Spring, but the increase in alcohol tax will increase automatically many more things for Canadians!
Canadians are already overtaxed and struggling due to pandemic restrictions, closures, lay-offs and recent inflation.
Inflation is a measure of how much prices are increasing over time, and it’s an important economic indicator for policymakers and consumers alike. In Canada, inflation is measured by the Consumer Price Index (CPI), which tracks the prices of a basket of goods and services that Canadians typically purchase.
Recent Trends in Canadian Inflation:
In recent years, Canadian inflation has been relatively low and stable. For example, in 2021, the average annual inflation rate was 2.7%, which is within the Bank of Canada’s target range of 1% to 3%. However, inflation has been higher than usual in 2022, with the annual inflation rate reaching 4.7% in January of that year, due to a combination of factors such as global supply chain disruptions and higher energy prices. Percentage of the inflation each year in Canada is off course measured and publicized by the Bank of Canada.
READ MORE: Is Canadian inflation cooling? Certainly grocery inflation isn’t!
Measured vs. felt like inflation for Canadians
As the old Romans had measured time and felt like time, every Canadian can see the measured inflation rate measured by Bank of Canada and the felt like or actual inflation at the end of every month. Inflation for a business owner who does well in his industry might have a different sense for inflation compared to a blue collar employee who’s pay check didn’t rise in the past or rose about 2.5% each year. Inflation might be felt differently to a home owner who’s mortgage is paid off in full compared to a family of 4 who have to rent and apartment or town home. And the list can go on and on.
Let’s compare every day expanses!
Prices for meat (up 7.3%), bakery goods (15.5%), dairy (12.4%), and fresh vegetables increased in grocery stores in January (up 14.7 per cent) on average. When we take meat prices at Costco for instance, the price did not go up much, but some grocery stores increased meat prices by as much as 20-30%.
Back in 2016 average gas price in Canada was $0.85 per Litre, in 2023 the average Canadian price of regular gasoline is $1.54, total inflation of 45% or 6.5% every year on average.
According to available data, average housing price in Canada back in 2000 was $55.000, in 2022 that price rose to $199.649 which is increase of 360% or 16.4% increase annually on average. Yet we all know that the average doesn’t necessary mean the real price increase. Everyone has their own experiences and actual witnessed housing market movement.
According to Rental.ca data, cost for 1 bedroom apartment in Vancouver went up 24.2%, cost of one bedroom apartment in Toronto went up 20.8%, same apartment in Burnaby went up 29.7% in price, Oakville 12..8%, Mississauga 18.6%, Ottawa 13.4%, London-ON 25.5%, Halifax 10.2%, Calgary 19.2 and so on. And these are only the inflation prices for one year, beginning of 2022 to beginning of 2023!
Cost of borrowing:
Since January 2021, the rate on five-year government bonds has increased from 0.3% to 3.4%. Due to strong inflation, the Bank of Canada (BoC) has kept hiking short-term interest rates. The rate raised to 4.50% in 2022 from 0.25% in 2021. Buying other products like car loan, went up as well.
New alcohol tax adds fuel on fire
Many consumers and retailers alike are worried that 6.3% in alcohol tax increase can significantly change their quality of living. While alcohol is not a basic human necessity, it is definitely someones livelihood. If consumers reduce spending on alcoholic beverages, Canadian distilleries and breweries will feel the outcome. LCBO, Beer Stores and other retailers across Canada will possibly reduce their staff or at least will not hire new employees. How about restaurants and bars? 6.3% in alcohol tax increase will at least increase the price of alcoholic beverage prices in restaurant, bars and other vendors who sell alcohol. Will their profit increase in the future? They will know soon enough.
Canada has already the strictest alcohol laws and alcohol taxes in the World. While in some European countries like Germany, Denmark, Austria, Belgium and Sweden the legal age for drinking Beer is 16, in Canada is 19 except of Quebec, Manitoba and Alberta where it is 18 years of age.
Among the G7 nations, Canada already has the highest alcohol taxation. In actuality, taxes make up about 50% of the cost of beer, 65% of the cost of wine, and 75% of the cost of other alcoholic beverages.
Alcohol tax comparing to other Countries
What alcoholic beverage producers and retailers think of this new tax hike
If increase in gas prices means price increase for every basic life necessities, does increase in alcohol taxes mean increase in many life enjoyments like restaurant, bar, venue, concert visits? Do we go from enjoyment to luxury here?
The Canadian Chamber of Commerce has urged the federal government to either abolish or at the very least freeze the automatic tax rise.