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Canada caps alcohol tax until 2026

An increase in alcohol excise duty in Canada has been capped at 2% for two years – a move that has been welcomed by the spirits sector.

Calgary Canada
Canada pays some of the highest alcohol taxes in the world

On 9 March, Chrystia Freeland, deputy prime minister and minister of finance, disclosed the alcohol tax cap in a pre-budget announcement. On 1 April 2024, taxes on beer, wine and spirits were due to rise by 4.7%.

It follows a one-year cap implemented in March 2023 when alcohol tax was due to increase by 6.3% in line with inflation.

In addition, the government has cut the excise duty rate in half on the first 15,000 hectolitres of beer brewed in Canada.

Rechie Valdez, minister of small business, said: “This announcement is great news for breweries, distilleries, and wineries from all across Canada who contribute so much to our national economy. Not only are they producing incredible products, they are also small businesses who are creating jobs and opportunities in their local communities.”

Since its introduction in 2017, the escalator tax, has led to automatic annual alcohol duty hikes based on the consumer price index (CPI). It was initially introduced during a period of 1% to 1.5% inflation.

“The choice to cap the excise tax increase at 2% represents alignment on the recommendations that the combined voices of the beer, wine, spirits, restaurant, and hospitality sectors made,” said Cal Bricker, president and CEO of Spirits Canada.

“This pause creates a stable outlook that consumers, business owners, and the government itself can rely on to plan for Canada’s long-term fiscal stability.”

The Canadian distilling sector contributes more than 8,500 full-time jobs, and more than CA$5.8 billion (US$4.3bn) to gross domestic profit.

Globally, Canadian distillers export products worth more than CA$660 million (US$489m) each year.

Data from CGA revealed that spirits sales in Canada’s on-trade rose by 7% in value in the year to 7 October 2023. However, volume dropped by 0.1%.

Vodka remains the country’s most popular spirit (with a 22.1% volume share) but it only posted a 0.1% increase over the 12-month period.

Whisky and Tequila saw growth of 0.8% and 2.7% respectively, but cordials, gin, rum and Cognac/brandy were all in decline.

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