As Canadian beer producers grapple with rising production costs and mounting international tariffs, industry leaders and taxpayer advocates are urging the federal government to halt its planned April 1 alcohol tax hike, warning it could further strain the already pressured hospitality sector and hit consumers in the wallet.
Set to increase by 2 per cent, the federal excise tax on alcohol – often referred to as the “alcohol escalator tax” – is projected to cost Canadian taxpayers approximately $40 million in 2025-26, according to Beer Canada, which represents over 90 per cent of domestic beer producers.
The annual tax hike, which has been automatically adjusted for inflation without a parliamentary vote since 2017, is drawing fresh criticism in light of U.S. President Donald Trump’s recent decision to impose 25 per cent tariffs on Canadian aluminum, a critical component in beer can production.
“Instead of making life even harder for brewers, distillers, pubs and restaurants by layering tax hikes on top of tariffs, the federal government should cut taxes to make Canadian businesses more competitive,” said Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation, in a news release.
Beer Canada has described the U.S. aluminum tariffs as “unjustified,” warning that the resulting cost increases could push beer prices higher across the country. The group notes that while most aluminum used in beer cans originates in Canada, the processing cycle often requires cross-border movement, exposing the industry to added costs.
“The direct impact of a 25 per cent U.S. import tariff on Canadian primary aluminum is estimated at about $165 million across the $3.7 billion in aluminum cans Canadian brewers use annually,” said Karine Cousineau, Vice-President of Strategic Communications at Beer Canada.
Cousineau added that taxes already account for nearly 46 per cent of the retail price of beer in Canada, meaning any further increases would disproportionately burden both brewers and consumers. She warned that hospitality and retail customers have already reached their financial limits and are unlikely to absorb more cost increases.
Brewers are not only asking for a freeze on the upcoming tax hike but are also pushing for broader tax relief and job protections across the industry. They have expressed concern over the compounding market pressures caused by inflation, tariffs, and slow economic recovery post-pandemic.