Search
  1. Home
  2. Personal Finance
  3. Frustration Brews Over Alcohol Tax Hike: Here’s What to Expect
Published February 1, 2023

Frustration Brews Over Alcohol Tax Hike: Here’s What to Expect

More taxes will increase pressure on an already strained industry as Canadians bristle at the notion of paying more for liquor.

The cost of wine, beer, and spirits is rising across Canada. Consumers and producers weigh in on the tax hike as we track down the cheapest way to buy booze on a budget.  

Canadian liquor tax hike of 6.3% coming in April

As of April 1, 2023, a federal excise tax will raise the cost of alcohol across Canada by 6.3%. The tax was introduced in 2017 by then finance minister Bill Morneau. It’s colloquially called the alcohol escalator tax, as it automatically adjusts every April 1, based on the Consumer Price Index. 

When inflation hangs out around the 3% benchmark targeted by the Bank of Canada, the alcohol tax isn’t particularly noteworthy. But throw the white-hot inflation rates of 2021 and 2022 into the mix, and you’ve got a tax hike akin to sprinkling salt in an open wound.     

Consumers may stay in or buy in bulk

Unsurprisingly, Canadians aren’t happy about the tax hike. This means future trips to the liquor store won’t be business as usual.

Amber Morin, a 46-year-old Vancouver Island resident and beer consultant for the website, Raincoast Brews, says she’s already begun to get more strategic about how and where she buys alcohol. “I’m more inclined to buy in bulk,” Morin says. “If I’m going to buy beer, I’ll buy 24 so that it’s cheaper per unit, and I can make it last longer.” 

Morin also anticipates a consumer shift toward staying in rather than going out. “People will just make their cocktails at home,” she says. “The restaurant industry is already suffering so much. I think this is just going to hurt those small businesses even more because they’ll have less clientele.”

Morin makes a good point. April’s tax hike doesn’t just hurt consumers. With people potentially spending less or staying at home, those who produce and distribute alcohol may have a challenging year ahead.

Alcohol taxes put stress on small businesses 

Provincial liquor taxes vary, but you’d be hard-pressed to find a business owner who thinks they should be paying more to sell alcohol.

“Each tax hike just puts more stress on our business,” Steve Himel, founder and general manager of Henderson Brewing Company in Toronto, said in an email. “This year, we saw many of our input costs go up. It has been really difficult to eat those costs, and a tax increase will just make it that much harder to run our business.”

Himel also points out that the tax hike will disproportionately affect smaller businesses, suggesting big breweries can rely on automated processes and cheaper ingredients.

This tax hike comes at a tough time. Pandemic-driven stay-at-home orders, supply chain hiccups, sky-high inflation rates — they’ve all taken their toll on businesses that produce and distribute alcohol.

“The restaurant industry is in a critical state of affairs right now,” says Tony Elenis, president and CEO at Ontario Restaurant Hotel and Motel Association. In addition to pandemic and inflationary pressures, Elenis points out the increasing cost of retaining staff in a competitive job market. “Many restaurants have closed sections in the restaurant, have changed hours of operation — perhaps closed one day a week — in order to be able to cope,” says Elenis.

The bottom line? Whether you distill it or sip it, paying more for alcohol in the spring will be tough to swallow. 

Get strategic about where and how you buy alcohol 

There are numerous ways to save on liquor, like skipping the premium label to grab a lower-shelf bottle or taking advantage of duty-free discounts (when the opportunity arises). You may also want to consider buying in bulk.

Amber Morin says she has already noticed the shift in the way consumers purchase alcohol. “Instead of buying a bottle of wine, they’ll buy a box,” says Morin. “Because it lasts longer. And it’s less cost per unit.”

Alcohol typically costs more at restaurants and bars, so get strategic about how and where you spend your money on a night out. Plenty of restaurants offer drink specials and discounts to incentivize folks to visit, especially mid-week when sales tend to be slower. 

The last factor to consider when purchasing alcohol is where your beverage comes from. This tax hike — and all the business challenges that have preceded it — won’t hit all establishments the same. It may be cheaper to frequent big restaurant chains and breweries, but your patronage may be more impactful at a mom-and-pop shop.

About the Author

Shannon Terrell

Shannon Terrell is a lead writer and spokesperson for NerdWallet, where she writes about a variety of personal finance topics. Previously, she was a writer, editor and video host for…

Read More
DIVE EVEN DEEPER
Alcohol Taxes in Canada Are Going Up: Here’s How to Cut Costs

Alcohol Taxes in Canada Are Going Up: Here’s How to Cut Costs

In the wake of some of the highest rates of inflation in decades, Canadians can add liquor to the list of things that’ll cost more in 2023.  There are ways to cut costs without going dry — though you may need to get strategic about how and where you spend money on alcohol. Tax on […]

What is Inflation and How Does it Work?

What is Inflation and How Does it Work?

The cost of goods and services changes over time due in part to something economists call inflation. In its simplest terms, inflation is the rise of average prices over time. Or, you could think of it as a decrease in the value of money over time. For example, when you compare the cost of a […]

Everything You Need To Know About Canada’s New Credit Card Fee

Everything You Need To Know About Canada’s New Credit Card Fee

As of October 6, 2022, Canadian business owners (excluding those in Quebec) can charge customers a fee — also known as a surcharge — of up to 2.4% for certain credit card transactions. The fee won’t pop up on receipts until the first week of November because businesses must provide at least 30 days’ notice […]

4 Silver-Lining Benefits of Canada’s Rising Interest Rates

4 Silver-Lining Benefits of Canada’s Rising Interest Rates

There’s a lot of talk in the news lately about rising interest rates. If you’re carrying a variable-rate mortgage or have money out on a line of credit, this talk may have you concerned, and rightly so. But, surprising as it might sound, there are a couple of ways in which rising interest rates can […]

Back To Top