Tax break lifts industry spirits

Liberals heed calls to scale back increase on alcohol duties

C.J. Helie, the president of Beer Canada, was waiting at Billy Bishop airport for a flight to Ottawa to hear the Liberals unveil their 2023 budget.

He and executives from similar industries had been working for a year to pressure the government to address a looming nightmare for their business: excise taxes on beer, wine and spirits that escalate automatically at a rate tied to inflation.

With sky-high inflation, the rise set to take effect on April 1 would be 6.3 per cent — triple what it had been just the year before.

Though that’s only about a cent a beer, the alcohol industry still saw it as a punitive measure as their business wasn’t at pre-pandemic levels.

They’d been hoping that the 2023 budget would provide some relief.

As Helie waited for his flight, he ran into a Liberal cabinet minister also en route to the nation’s capital.

“‘You elevated this to a national discussion on beer prices,’ ” Helie said the minister told him. “From the political side, that’s when we knew we were there.”

There was the measure introduced in Tuesday’s budget: a cap on the excise duty for 2023 at two per cent.

It was a victory not just for the industry but for the Liberal backbench: In the words of one MP,

they’d kicked the shins of government until they were bruised and bloodied to get the change made because they’d never hear the end of it if they didn’t. The issue of the automatic escalator for the excise tax wasn’t a new one.

The tax isn’t a consumer tax, but one levied on businesses at the time of production, and in the cases of products like beer, is sometimes referred to as a “sin tax.”

Though it makes up but a small portion of actual taxes on alcohol, when the automatic escalator was unveiled in 2017, it was perceived as being so controversial that the Senate and House of Commons came to loggerheads over the implementation.

Efforts to get it changed have persisted ever since, but it took the pandemic to people frothing over it anew.

With restrictions in place, the hospitality sector was devastated. Despite everyone crossing their fingers and hoping for a rebound in 2022 as restrictions lifted, it didn’t go back to pre-pandemic times.

Then, global factors like the war in Ukraine and supply chain issues began massively pushing up the costs of everything from packaging to transport to the materials needed to domestically make alcohol.

To the beer, wine and spirits businesses,

the fact the excise tax was going to jump too, just felt like another sting.

On top of reaching out to every single MP multiple times, in person and via email, Helie and others gathered detailed statistics and other data to present to bureaucrats inside government to make their case as well.

Except despite all the emails and meetings and calls and mail-outs, their target of getting changes made by last year’s fall economic statement went nowhere.

Helie said they knew they needed to up their game, because they were sounding just like every other advocacy group asking the government for something.

“People hear this in Ottawa, every day, 10 times a day,” he said.

Enter Bob and Doug McKenzie and a lobbying campaign that took on a life of its own.

Convincing the Canadian comic duo of Rick Moranis and Dave Thomas to reprise their legendary beer-drinking characters, and even their catchphrases, to drum up opposition to the planned tax increase created a pressure movement beyond Helie’s expectations.

The radio spots attracted a steady stream of earned media — Bob and Doug hadn’t been seen together since 2017, for starters — and from there, the political tide seemed to suddenly turn in the industry’s favour.

MPs were going home for weekends and talking to constituents and small businesses and suddenly getting an earful about the excise tax — even down to the number it was going up: 6.3 per cent.

While the Opposition parties had already been onboard with the change, backbench Liberals began agitating too. They were already smarting with spending scandals tarnishing the party as being out of touch, like high costs for hotel rooms and the like.

It was also being telegraphed very clearly that the 2023 budget document was going to be restrained and not have a heavy focus on everyday pocketbook measures.

Pausing the excise tax was a small thing that could have a big political impact and that message began to be communicated by caucus, repeatedly, to Finance Minister Chrystia Freeland and others.

“Why make it more expensive for people to enjoy a small pleasure” was a refrain in caucus, one MP told the Star. Another described it as Liberal MPs kicking the government in the shins over the issue until they were “bruised and bloodied.”

Yan Baker, Etobicoke Centre MP, declined to discuss any caucus matters, but said he heard a lot about the alcohol taxes from constituents, and bar and restaurant owners in his riding.

“This is something I mean, look, people are struggling with,” he said.

“And I think the measure in the budget is designed to help alleviate a cost that would have been incurred by a combination of my constituents, consumers, and restaurants, and bars. So I think this is a measure to help alleviate some of that.”

To Helie, the fact the change was in the budget reflects the way politics ought to work: MPs listening to people in the ridings and taking those concerns back to government.

Why make it more expensive for people to enjoy a small pleasure? MEMBER OF PARLIAMENT ABOUT EXCISE TAX ON ALCOHOL