Ottawa maintaining cap on alcohol tax increase for another two years

The federal government seems to backing away from annual alcohol tax increases strictly tied to inflation.

It is extending a 2 per cent cap on the increase for another two years, aiming to keep costs down for Canadian brewers, wineries and distilleries.

The alcohol excise tax automatically increases every year, automatically going up in line with inflation. However, in 2023, high inflation would have meant an almost 6.3 per cent increase, but the federal government capped the increase at 2 per cent to “provide tax relief for small businesses” linked to the alcohol industry. The following year it extended the cap into 2024-25 and 2025-26.

Now, an official not authorized to speak about the matter ahead of the announcement told The Canadian Press that the federal government is on the verge of renewing the cap through to 2028. The official says the extension is intended as support for Canadian alcohol manufacturing in the midst of ongoing global trade disputes, as well increases in hospitality expected with the FIFA World Cup this summer.

The federal Conservatives , Canadian Taxpayers Foundation and brewing and hospitality industry voices have called on Ottawa to scrap the planned tax increase entirely.

The Canadian Taxpayers Federation estimates the 2 per cent hike, taking effect April 1, 2026, will add about $41 million in extra tax revenue to Ottawa’s coffers. The federation has argued the automatic increase is undemocratic because taxpayers have no meaningful say each time it jumps. The increases occur annually without a vote in parliament.

Ahead of this year’s increase, brewing-industry voices and unionized brewery workers also warned an increase could reduce production, delay investment and contribute to layoffs.

Beer Canada argued that the tax keeps prices climbing, at a time when the cost of ingredients, packaging and energy are already high and beer sales are flat or falling. Workers across Canada’s brewing sector are making it clear, said Richard Alexander, president of Beer Canada. Automatic tax increases put good union jobs at risk, he added.

“The momentum we are seeing from organized labour reflects the real economic pressure facing breweries, their employees, and communities across the country.”

In a mid-February letter, Teamsters Canada urged the Prime Minister to eliminate the automatic beer tax escalator.

“While our American neighbours are lowering taxes to support their breweries and their workers, Canada is moving in the opposite direction. The consequences are serious. Our plants are increasingly at a disadvantage, and the jobs of our members are at risk.”

Meanwhile, the hospitality industry fears higher prices will push customers to cut back on pints or switch to cheaper options, hurting sales at a time when margins are already tight.

Nova Scotia brewers and hospitality owners say they have already absorbed multiple tax‑driven price hikes and can’t keep raising menu prices without losing customers or shrinking their business.

“We can’t continue to raise our prices, but the government continues to raise their prices on us. So, it’s just not good for business overall,” said co-owner of Nine Locks, Danny Ohearn .

• New 2% tax hike on alcohol takes effect Wednesday
• Alcohol, mini-golf helped double Canadian Senate's hospitality bill since 2019, says taxpayers group

Our website is the place for the latest breaking news, exclusive scoops, longreads and provocative commentary. Please bookmark nationalpost.com and sign up for our daily newsletter, Posted, here.