Alcohol Pricing & Tax Increases in Canada – Explained

The statistic that beer in Canada is 46.4% tax, 50% tax or simply “half tax” is often repeated and reported in the media.

Its source is a May 2018 report that industry lobbying group Beer Canada paid a consulting company to produce.

Beer is 45% – or “half tax” only if it was made by a major beer company, eg. Molson, Labatt, Sleeman and Moosehead, you assume the same volume of beer was sold in each province, and you don’t consider deposits part of the retail price.

The pricing models used in this report, including all tables, calculations and sources for each input can be found in this Google Sheet.

Alcohol facts and statistics in Canada

• In 2023, the federal excise tax on alcohol accounts for about 6% of the retail cost of a beer made by a major manufacturer and 2% of the retail cost of a beer made by a craft brewery.
• For beer brewed in Canada by Canadian brewers the tax is progressive, so the rate increases as a producer’s annual production volume increases, which means large beer companies pay higher rates than craft and microbreweries.
• The federal excise tax on alcohol primarily applies to the 3 major, multinational beer manufacturers (Molson Coors, AB InBev, Sleeman) who had a market share of around 75% of beer sales in Canada in 2019.
• The tax has been automatically increased annually on April 1st to adjust for the previous year’s inflation since indexation was reintroduced in 2017.
• The 2023 increase was slated to be 6.3%, which was estimated to increase the cost of a 355 ml can of beer for consumers by around 1 cent.
• For 94% of Canadian craft breweries, a 6.3% increase to the tax would have cost them at most an additional $12,658 a year in federal taxes or up to 0.42% of their revenue, according to our estimates.
• The 3 major manufacturers are the primary members of Beer Canada, a lobbying organization that promotes their interests and met with Members of Parliament and policy officials 92 times in 2022. These same companies own and operate The Beer Store in Ontario.
• Beer Canada conducted a nationwide campaign in 2023 to generate concern about the tax and magnitude of the increase at the same time as lobbyists for restaurants, wineries, and anti-taxation.
• The Conservative Party of Canada sent out flyers to constituents warning about the escalator tax and voted to call on the government to cancel the alcohol tax increase.
• The 2023 Federal Budget then proposed a one-year cap on the increase to 2%, saving the 3 biggest beer companies an estimated $25.2 million in excise taxes.
• The Beer Store’s container recovery rate has declined gradually from a peak performance of 95% in 2009 to 79% in 2021. Compared to their peak recovery rate, an estimated 28,554 tonnes was disposed of in 2021 that could have been diverted from disposal.

Ontario

• In April 2023, out of the $12.25 6-pack of 341 ml bottles from a major brewer in Ontario, which accounts for 36% of beer sales in Canada, 41% of the retail price goes to the government or 39% if you consider the deposit part of the retail price.
• 94% of the breweries in Canada produce less than 1,500,000 litres of beer. Of those in Ontario, 29% of the retail price of their beer goes to the government, or 27% if you consider deposits part of the price of a beer.
• Ontario’s beer taxes are 2 to 16 times greater than the federal excise tax for a microbrewery and 2 to 3 times greater for beer manufacturers, depending on how the beer was produced and how much the brewery produces annually.
• The Ontario government’s commodity tax generates an annual $2.55 billion in revenue for the province to support critical services like healthcare, education and infrastructure.

What is the alcohol tax?

The alcohol tax, or escalator tax, is an excise tax imposed on beer, wine, and spirits produced in Canada. Breweries, wineries and distilleries pay per litre produced at the point of manufacturing or import.

There are separate alcohol taxes applied at the federal and provincial level.

Federal alcohol excise tax

The federal excise tax on alcohol is charged as a flat fee per litre produced or imported, paid by brewers and are included in retail prices. Rates for beer are imposed under the Excise Act, while the Excise Act, 2001 applies similar excise taxes to wine, spirits, cannabis and tobacco products.

The amount of the tax was indexed to inflation in 2017 via amendments to the Excise Act in Bill C-44. The tax rate automatically increases on April 1 every year by the previous year’s inflation, as measured by the percentage increase in the Consumer Price Index (CPI) for Canada over the 12 month period ending September 30 of the previous year.

Before indexation, federal governments had to raise the tax manually on an ad-hoc basis. Renegotiating rates took more time and made changes less predictable for producers. In addition, without automatic increases, the effective rate of the excise tax would decrease with inflation as pointed out in a 2016 Beer Canada lobbying document.

For beer brewed in Canada by Canadian brewers it is a progressive tax that increases as a producer’s annual production volume increases, meaning large beer companies pay considerably more than craft and microbreweries.

Historical federal excise increases

Here are the escalator tax increases each year since 2019 on beer packaged in Canada containing 2.5% or more of alcohol.

In 2022, the tax went up 2.4%. For 2023, it was set to increase by 6.3% on April 1, but on March 22, after a nationwide campaign by lobbying groups to stir up concern about the tax and magnitude of the increase, MPs voted 170 to 149 in favour of a motion calling on the government to cancel the alcohol tax increase. The 2023 federal budget later proposed a temporary cap of 2% on alcohol excise duties. The potential cap will stay in place for one year, pending budget approval.

Excise taxes are added to specific goods or services such as gas or airline tickets paid for by businesses as one of the costs of doing business. Since businesses must still turn a profit, they are passed on to, and indirectly increase prices for consumers. They are included in the price consumers pay at the store.

A “sin tax” is one type of excise tax that is applied to goods and services that are able to or perceived to be harmful or costly to society and individuals and is commonly applied to cigarettes, alcohol, gambling and vaping. One rationale for their use is to
control externalities, which are negative side effects or indirect impacts on society caused by the production or consumption of a good. The tax makes the good more expensive, reducing demand, and the funds raised can be used to offset the societal costs.

For example, fossil fuels are cheaper than clean alternatives, but their price does not account for their contribution to climate change. Funds from gas taxes may go towards repairing local infrastructure or directly counteracting of climate change.

Funds from or on alcohol taxes may be collected to pay for its externalities, including social and healthcare costs (18,000 deaths and 105,000 hospitalizations in 2017), crime, car accidents, and lower economic productivity, totaling $16.6 billion in costs to Canadian society in 2017 and $19.7 billion in 2020, according to studies by the Canadian Centre on Substance Use and Addiction (CCSA) and the University of Victoria’s Canadian Institute for Substance Use Research (CISUR).

Tax on beer packaged in Canada

Beer packaged in Canada that is either imported or in excess of 75,000 hectolitres per year have flat tax rates applied. These rates primarily apply to the large multinational manufacturers: Molson, Labatt, Sleeman and Moosehead. The vast majority of breweries in Canada will never pay these rates.

Canadian craft breweries pay lower federal excise tax rates

According to Beer Canada, 94% of Canada’s breweries are small, local operations producing less than 15,000 hL of beer. A brewery producing exactly 15,000 hL would pay an average tax rate of $11.36, or 60% to 70% less than the major manufacturers pay.

Breweries with production volumes lower than 75,000 hectolitres (hectolitre or hL = 100L) or 7,500,000 L per year pay lower tax rates on the initial amounts they produce. Under the proposed 2023 rates, small producers will pay as little as $3.55 to $30.19 per 100L – 1% to 85% of the tax applied to large producers.

Here are the rates on beer brewed by domestic brewers:

Assuming they sell their beer in a standard 473 ml can, a brewery producing up to 200,000 L per year pays up to $7,104.00 in federal excise taxes or about 1% of the federal excise tax rate that large multinational producers pay:

Provincial alcohol taxes

All provinces reduce beer markups/taxes for brewer sales with lower production thresholds.

In Ontario, provincial taxes on beer made by an Ontario beer manufacturer are required under the Liquor Tax Act, 1996 and consist of 3 components: a Beer Volume Tax, Beer Basic Tax and an environmental tax. They do not apply to foreign imported beer.

These taxes are included in retail prices and are paid by for by consumers at the point of sale. Retailers collect these provincial taxes on behalf of the government on the beer they distribute in Ontario and remit it to the government.

Beer Volume Tax

The Beer Volume Tax is $0.176 per litre purchased regardless of the size of the brewery or container size, but it does not apply to beer made at brew pubs. It is not indexed.

Beer Basic Tax

The beer basic tax rate is charged per litre purchased at a rate that varies depending on the production volume of the producer and form factor of beer produced – see table below.

• Who made it
  • Beer manufacturers: more than 4.9 million litres
  • Microbrewers: up to 4.9 million litres
  • Brew pubs:

• Type
  • Draft beer: keg >18L
  • Non-draft beer: bottled

Together, they can be 2 to 16 times greater than the federal excise tax for a microbrewery and 2 to 3 times greater for beer manufacturers, depending on how the beer was produced and how much the brewery produces annually.

94% of Canada’s breweries produce less than 15,000 hectolitres of beer annually, so in Ontario, that would mean paying an average of up to $0.2896/L in Ontario excise taxes and a maximum of $0.1412/L in federal excise taxes on cans and bottles.

The rates are increased based on the average CPI for Ontario over the previous three years.

In 2019, Bill 138 – Plan to Build Ontario Together Act removed annual adjustments and authorized the Minister to choose a date when the adjustment calculation is implemented, effectively freezing the rates until the government decides to intervene. Said another way, it returns to ad hoc increases, while continuing to avoid the negotiation process since the formula is known.

In 2023, the Minister of Finance signed an amendment to O. Reg 257/10, made under the Liquor Tax Act, 1996 to delay the date of the next scheduled adjustment to March 1, 2024, forgoing index-based adjustments for another year. The current beer basic tax rates will continue to apply until February 29, 2024.

Environmental tax

The environmental tax is $0.893 per non‑refillable container purchased. It is not indexed.

How much would the 2023 increase have affected the cost of a beer?

An increase of 6.3% to the federal excise tax in 2023 via the automatic adjustment sounds significant, but it was estimated to increase the cost of beer for consumers by:

• three quarters of a cent ($0.0078) per 355 ml can of beer (Office of the Deputy Prime Minister and Minister of Finance)
• 1 cent per beer (Sylvain Charlebois)
• 10 cents on a 12-pack ($0.0083 per beer) (Beer Canada)
• 70 cents on a 750 ml bottle of 40% alcohol (LCBO)

How much would it have affected Canadian craft breweries?

For 94% of Canadian craft breweries, a 6.3% increase to the tax would have cost them at most an additional $12,658 a year in federal taxes or at most 0.42% of their estimated revenue.

For example, Beau’s Lug Tread sells for $4.60 to $6.17 per litre, depending on the volume it is sold in (ie. keg, multi-packs to individual cans).

Approximately 50% of the retail price goes to the craft brewery once taxes and retailing costs and markup are accounted for, producing the the following estimated revenues and tax percentages:

How much would it have affected large multinational breweries?

The top 3 biggest beer companies would have had to pay an estimated total of $37.1 million in additional federal excise taxes in 2023, but after the federal government capped what would have been an automated 6.3% increase down to a 2% increase in the 2023 Federal Budget, they saved an estimated $25.2 million in excise taxes.

Assumptions

This assumes that:

• Canada’s share of Molson Coors’ “North American segment” in 2022 was about 11% – typical for 2013 to 2019 as per their annual reports.
• A loss of market share of 2% by each of the top 2 companies to craft breweries compared to 2019, continuing the existing trend and the rise of craft breweries.

For reference, and to confirm the above numbers are realistic, Molson Coors’ 2019 annual financial report – the last year that Canada was reported separately from North America – reported selling 805.9 million litres of beer, paying making $1.73 billion in sales and paying $421 million in excise taxes, or approximately $0.52 per litre sold.

And here are the top companies’ estimated market shares in Canada from 2010 to 2019:

Sleeman, the third-largest brewing company had an annual production capacity of 200 million litres in 2021, which assuming it ran at maximum capacity, would account for a market share of roughly 6-8%. Craft breweries have a 10% (and growing) market share in Canada in 2022 according to a study by accounting firm MNP.

Nationwide campaign by industry lobby groups to eliminate or reduce the tax

Alcohol producers likely oppose excise tax increases as they directly compete with their profit margins and affect the price at which they can sell their products to retailers and distributors.

In his excellent and fun teardown of Beer Canada’s “Axe the Escalating Beer Tax” campaign in 2018, beer brewer, book author and columnist Jordan St. John sums it up as follows:

Beer Canada is attempting to make you angry about the fact that their largest members are going to be paying about three tenths of a cent more per can of beer in excise tax next year.

In order to save Labatt and Molson about 1.2 million bucks a year (in Ontario, mind you) Beer Canada is attempting to drum up outrage at the federal government over an amount that if passed directly on to the consumer in a forthright manner is negligible. In order to do that, they are attempting to convince you that taxing large multinational corporations who until very recently had a defacto monopoly on beer sales in the province of Ontario is a bad thing.

Jordan St. John

That was in 2018, the automatic increase 5 years later in 2023? About 1 cent.

In 2018, he calculated that it could take until 2040 until the escalator tax increases hiked the price of a case of beer beyond $1. “People as yet unborn will be of drinking age before it costs you a dollar a case.”

Lobbying groups for the alcohol and restaurant industries raised the alarm in unison about the escalator tax and major news outlets gladly spread the word, likely due to inflation and affordability being a topic of concern.

Claiming to be advocating for affordability on behalf of Canadians and the protection small, local producers, the industry was quoted saying that beer is “50% tax”, Canada has the “highest beer taxes in the G7” and warning that “higher prices may lead to an increase in illicit activities” in numerous articles published in the Globe and Mail, National Post, Toronto Sun, and CBC. I’ve listed links to some of them below.

They were also buying advertisements on relevant Google searches:

Given the magnitude of the price increase that would be felt by consumers (if at all), it is interesting to see the lengths to which the industries went to push back against an existing, automatic, predictable increase to the excise tax they pay.

Here are some of the lobbying groups that were quoted in articles and what they were saying:

• Canadian Taxpayers Federation is a non-profit fiscal conservative advocacy organization that argues against increases to government spending, politician salaries and taxes. It receives support from the Atlas Network and State Policy Network and other organizations in the United States. The named organizations support libertarian and conservative think tanks around the world and in turn receive funding from charitable foundations run by the Koch family, owners of the Koch fossil fuel companies, ExxonMobil, Philip Morris and the Koch brothers, Philip Morris, Facebook, Microsoft, AT&T, Time Warner Cable, Verizon, and Comcast, respectively. They are the creators of the “Debt Clock“.
  • Toronto Sun/Hamilton Spectator – The “alcohol escalator tax is fundamentally undemocratic”, quoted France’s finance minister in the 17th century, who said the job of the tax man is “plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”
  • CTV News – Beer is 50 per cent tax.
  • Retail Insider – calling on the federal government to scrap its plan to increase the carbon tax, alcohol taxes and member of Parliament pay on April 1.
• Sylvain Charlebois
  • CBC – Canada has surpassed Japan with the highest tax rate on alcohol in the industrialized world, charging taxes that account for around 50 per cent of the price of beer, 65 per cent of the price of wine, and 75 per cent of the price of spirits.
  • Global News – “It’s just one tax people don’t need right now,” “It doesn’t seem like much, but it’s more that the tax burden is only increasing.” The tax may have a smaller impact on the price of craft beer since it is lower volume and usually at a higher price, but could affect larger manufacturers more.
  • Toronto Sun (same as Retail Insider, Hamilton Spectator) – Sharing graphs with data provided by Beer Canada (see below), Charlebois writes: “Canada already has the highest alcohol taxes amongst G7 countries. In fact, taxes alone account for around 50% of the price of beer, 65% of the price of wine, and 75% of the price of spirits.”
    
    Warning of bootlegging and smuggling: “Higher prices may lead to an increase in illicit activities, as consumers seek out cheaper alternatives. For alcohol, this means bootlegging and smuggling.”
    
    If the government doesn’t protect our agri-food industry as much as it can, “or else, with higher taxes, many companies will flee Canada, eliminating options and reducing competition, thus pushing prices even higher.”
    
    “Canada is now reaching a point where an entire industry can be negatively impacted by our government’s thirst for more tax dollars, no pun intended.”
    
    “Some say the escalator tax, which few Canadians know about, is undemocratic.” and “…with higher taxes, many companies will flee Canada, eliminating options and reducing competition, thus pushing prices even higher.”
• Restaurants Canada is a national not-for-profit association representing the industry.
  • Global News – Estimates the tax increase will cost Canada’s food-service industry about $750 million a year, with the average casual dining restaurant expected to pay an extra $30,000 towards alcohol.
  • CTV News – calling for a deferral so that restaurants don’t have to “absorb another tax increase at this vulnerable time”
• Beer Canada is a voluntary lobbying group that represents 45 brewers out of the 1,210 breweries in Canada. Contrary to the perception its name implies, it main members are the multinational corporate giants Labatt (Belgian – AB In-Bev), MolsonCoors (headquartered in Colorado) and Sleeman (Japanese – Sapporo), which also happen to be the co-owners of The Beer Store in Ontario, which accounted for just over 60% of beer sales in Ontario in 2020.
  • Global News – says that Canada has the highest alcohol taxes among G7 nations, with about half the cost of a typical can of beer going to taxes, while up to 80 per cent of a bottle of alcohol is taxed, according to Spirits Canada. Since the tax is a production tax imposed on the brewer at the point and time of production, “it is then magnified by other fees and taxes imposed by distributors, retailers, and provinces, including sales taxes,” making the impact on a 12-pack likely closer to 20 cents.
    
    “It’s do or die time in terms of action,” “April 1 is right around the corner and the question will be, does the government’s actions live up to their commitment.” “When inflation is through the roof, we need to rethink this automatic formula,” “The industry is already in dire straits. Using a rigid formula in a time like this is unacceptable.”
    
  • CP24 – At 46%, almost half of beer’s retail price are taxes today in Canada, the highest rate in the G7
  • CTV News – At 46%, almost half of beer’s retail price are taxes today in Canada, the highest rate in the G7
  • Brewers Journal – I think Canadian beer taxes would be about 45% higher than other G7 countries on average
  • Curiocity – At 46%, almost half of beer’s retail price are taxes today in Canada, the highest rate in the G7
  • Guelph Today – Canada’s beer tax rates are already the highest among G7 countries.
  • Brewers Journal/My Prince George Now/My Cowichan Valley Now/My Campbell River Now/My Cariboo Now – about 47% of the cost of beer in BC is pure tax … The new increase would see that number go over 50 per cent … Canadian beer taxes would be about 45% higher than other G7 countries on average…
  • Hired Rick Moranis and Dave Thomas to reprise their characters of Bob and Doug McKenzie in order to denounce the pending hike in a series of radio spots. “Everything else in Canada is frozen, eh? Freeze the beer tax, too,” says Doug McKenzie (Dave Thomas) in one. Other ads brand the April 1 date of the tax hike as “April the Worst.”
• Canadian Chamber of Commerce
  • On average, 47 per cent of the price of beer in Canada is from federal or provincial taxes.
  • CTV News – called on the federal government to repeal the automatic tax increase or at minimum, freeze it. 
• Wine Growers British Columbia – Miles Prodan, president and CEO of the industry association representing about 200 wineries across the province, says the current excise tax cap is a “victory to some degree,” but he hopes the federal government would eventually remove the escalator tax on Canadian wines. “You’re just capping it two per cent this year, it’s fine for this year, but what happens next year and the year after that and the year after?”
• Craft Distillers Guild of B.C. says its a “lazy taxation policy” to automatically raise excise tax based on inflation, which he argues has made B.C. and Canadian alcohol products less competitive compared to those from other G7 nations.

Federal conservatives join the cause

In addition to this media coverage, I received the following flyer from my MP about the escalator tax. In my opinion, the way it is worded makes it sound like the tax is new, expensive, and a severe threat to producers in the region.

Contrary to the perception this flyer may create, the increase to the escalator tax is not a:

• Surprise,
• Large increase in the retail price of alcohol, or
• Threat to small producers when compared to its impact on larger ones

In House of Commons debate on March 21, 2023, several MPs echoed the industry’s concerns:

Mr. Speaker, the government’s April 1 planned tax hike on alcohol is no joke for Canadian craft brewers.

This buzzkilling tax would mean fewer jobs, fewer paycheques and higher beer prices for Canadians, who already pay some of the highest beer prices in the whole world. We can talk about hosing Canadians.

Will the government help our buds make more suds and freeze the April 1 escalator tax on alcohol, or will it continue its brew-ha-ha on job-killing, inflation-inducing tax hikes on Canadian craft brewers and consumers?

Ryan Williams

On April 1, our local breweries, distilleries, wineries and cideries will be hit with a 6.3% increase on the excise tax, the greatest increase in 40 years. Forty-six percent of the cost of a beer is already tax, and now the Liberals want Canadians to pay more.

Lianne Rood

If that were not enough, he is now attacking Canadian microbreweries. On April 1, the excise tax on beer, wine and spirits is going up by 6.3%. This will hurt everyone from producers to consumers.

Richard Martel

How much of a beer’s price is tax in Canada?

According to industry lobbyists

The statistic that beer in Canada is 46.4% tax, 47% tax, rounded up to 50% tax or simply “beer is half tax”, which has been repeated in countless articles, social media posts and by Members of Parliament, comes from a May 2018 report that industry lobbying group Beer Canada paid Doug Mander of Mander Consulting to produce.

The study reviews the differences in beer taxes between Canada and the United States.

Includes

It loosely defines “taxes” as markups and taxes that end up generating revenue for governments, including:

Federal

• Federal portion of sales tax (5% GST)
• Federal excise tax

Provincial

• Provincial portion of sales taxes (10% in NL, PEI, NS, NB, 10% instead of the general 7% in BC)
• Wholesale volume or percentage-based markup
• Environmental levy

Excludes

It leaves out the following:

• Cost of service as it offsets the cost of warehousing or retailing the products.
  • In Ontario, in-store cost-of-service applies to packaged beer that is sold at LCBO stores and offsets the cost of retailing the product in a brick-and-mortar or online store. Out-of-store cost of service applies to beer that is warehoused by the LCBO and offsets the cost of warehousing and distribution.
  • In provinces where markups also pay for retailing costs, Beer Canada factors an estimated cost component out of the provincial markup revenue to create a tax component. What provinces are these?
  • In Nova Scotia, an estimated retailing cost of 10.1% of content price was excluded from the beer markup. This same estimate was applied to PEI and NB.
• Container recycling fee
• Deposits

According to the 2018 Beer Canada report, excluding deposits, the province received 34% and the federal government 11% for a total of 45%, leaving 38% for the brewer and freight provider:

According to a Beer Canada spokesperson, Beer Canada undertakes an internal survey of the top selling beer stock keeping units (SKUs) sales volumes by province and calculates a detailed price breakdown for these to determine the tax burden as a percentage of the retail price (excluding the value of refundable container deposits) in Canada.

The following graphic was published in an op-ed by Sylvain Charlebois on Retail Insider and noted as being provided by Beer Canada.

After I inquired about the source of these numbers, Beer Canada stated that the chart compares the numbers for Canada and the US from the report by Mander Consulting to those crowdsourced by the website Numbeo for the EU and UK and published in a report by the Broadbent Institute that relies heavily on the Beer Canada report. Japan’s beer tax rate is based on a government retail price survey of grocer prices from October 2022 and a beer tax rate of 70 yen per 350ml container (420) plus a 10% consumption tax (107 yen).

According to our research

However, there are at least 4 issues with the data and statistics provided in the report:

1. It applies to major companies, not craft breweries.
2. Pricing data was collected in March 2018, Ontario’s taxes haven’t increased since 2018 and BC’s haven’t increased since 2015.
3. The average total tax of 46.8% considers all provinces equal, when BC, ON and QC accounted for 75% of sales.
4. It excludes deposits, which were approximately 5% of the total retail price paid by the consumer.
5. It considers retail profits that go to the government tax, but not the profit of private retailers.

1. Beer from major companies is 45% tax, but from craft breweries its 29%

Beer is 45% tax only if it was made by a major beer company, eg. Molson, Labatt, Sleeman and Moosehead.

All provinces reduce beer markups/taxes for brewer sales with lower production thresholds, but the report only considers the highest rates which apply to the top production tier reserved for the largest breweries.

For beers made by microbreweries producing up to 1,500,000 litres of beer (which applies to 94% of the breweries in Canada), excluding deposits, the province receives 22% and the federal government 7% for a total of 29%, leaving 57% for the brewer and freight provider. If you consider deposits part of the price of a beer it’s 27%.

Steve Innocente, the owner of Innocente Brewing in Waterloo told CTV News that the federal excise tax: “When it breaks down to the cost per can of beer it’s very, very miniscule. We’re talking 1.7 cents if I round up”. He provided the following chart, showing the breakdown of the relative proportion of the costs that go into making a $4, 473 ml can of beer:

2. Ontario’s beer taxes haven’t increased since 2018, BC’s since 2015

Beer is 45% tax only if the year is 2018.

The pricing data in the report was collected in March 2018, however, while the price of beer has risen, Ontario’s beer basic tax, volume tax and environmental tax haven’t been increased since March 1, 2018. BC’s wholesale beer markup hasn’t increased since 2015.

At the same time, the price of beer purchased from stores in Ontario has increased 14% between then and March 2023, according to Statistics Canada.

Predictably, for a beer made by a beer manufacturer, the distribution of the sale – excluding deposits – going to the:

• Federal government have remained constant, because they are indexed to inflation
• Ontario government have decreased from 34% to 31%, since they haven’t been increased
• Cost of retailing have lost some share, but have mostly kept up because they were indexed part way between 2018 and 2023
• Supplier has gone up from 38% to 44%, taking some share from the other parties

3. It doesn’t consider the amount of beer sold in each province

Beer is 45% tax in Canada only if you assume all provinces sell the same amount of beer.

To calculate the frequently cited statistic that beer is 46.8%, 47% or “half tax” in Canada, the report equally weights the 10 provinces to find the average total tax percentage:

However, this does not account for the underlying differences in beer sales between the provinces or the amount of tax revenue collected by each. BC, ON and QC accounted for 75% of all sales in Canada in 2018, so their tax percentages should be a larger factor when calculating the Canadian average.

Taking the average of percentages in a dataset can lead to inaccurate results because it does not account for the differences in the size of the underlying data. Averaging percentages can be misleading when the data points are not uniformly distributed, or when there are differing weights associated with the various percentages. This is known as the “Simpson’s Paradox.” Examples of how averaging percentages can lead to inaccurate results can be found here, here, here and here.

Calculating the weighted average using Beer Canada’s 2018 beer sales by province, the average portion of the price paid by consumers in Canada that went to the government was 41.8%:

4. Deposits were excluded from the calculation

Beer is 45% tax only if don’t consider the deposit cost a part of the price.

The 2018 Beer Canada report does not consider deposits to be part of the retail price of a beer because it is refundable, excluding the roughly 5% of the retail price they make up, are is paid by consumers, from its calculations.

The Beer Store’s container recovery rate was 79% in 2021, meaning 1 in 5 containers was not brought back for a deposit refund and the consumer absorbed that cost permanently.

Instead, if you don’t assume that all containers are deposited and include the deposit fee, the portion that goes to the government decreases from 45% to 42%:

5. Retail profits are counted as tax when the retailer is government-owned

One interpretation is that industry figures incorporate government-owned retail monopoly profits into their definition of taxation. This line of reasoning sets different standards for private retailers, the bulk of alcohol sales in Canada, and government-owned retailers, and the profits of private retailers are not considered taxation.

In Nova Scotia, an estimated retailing cost of 10.1% of content price was excluded from the beer markup. This same estimate was applied to PEI and NB. This percentage, from the NS liquor board’s Annual Business Plan,

In provinces where the cost of excludes liquor board markups that are equivalent to private sector retailer margins from our estimates of beer tax fiscal burdens.

Every province in Canada generates significant revenues from commodity charges or taxes applied to the sale of beer. In most Canadian provinces, regardless of whether beer is sold by a liquor board or a private retailer, it is at some point considered legally owned by the liquor board which collects a markup which is remitted to the province even if the liquor board does not touch the product in question.

In the case of provinces where markups also pay for liquor board retailing costs, Beer Canada factors the cost component out of the provincial markup revenue to create a tax component.

As provinces generally do not have indirect taxation powers under the Canadian constitution, beer commodity charges, which have all the attributes of a tax, are collected as markups in most provinces.

The Beer Store states it operates on a break-even basis, charging brewers just enough in service fees to cover the cost of operating their retail stores.

According to the Public Health Agency of Canada

A peer reviewed article published by the Public Health Agency of Canada in 2021 investigated the claims made by brewers and distillers that 50% and 80% of alcoholic drinks are government taxes in campaigns to decrease the amounts of alcohol tax they are subjected to.

Using Statistics Canada data and provincial sales data and price breakdowns, they found that the total sales tax and excise taxation are mostly between 20% and 30% of final retail prices, well below the industry claims.

According to the Liquor Control Board of Ontario

The Liquor Control Board of Ontario (LCBO), the government-operated alcohol retailer in Ontario and one of the largest alcohol retailers in the world, provides up-to-date examples of their pricing structure/markup. We can re-run the distribution of the retail price using these numbers from April 2023:

In April 2023, out of the $12.25 6-pack of 341 ml bottles from a major brewer in Ontario, which accounts for 36% of beer sales in Canada, 41% of the retail price goes to the government or 39% if you consider the deposit part of the retail price.

94% of the breweries in Canada produce less than 1,500,000 litres of beer. Of those in Ontario, 29% of the retail price of their beer goes to the government, or 27% if you consider deposits part of the price of a beer.

Manufacturers set their own prices. The final retail price is determined by adding import duties, freight, levies, a standard mark-up, HST and finally a container deposit.

Beer pricing and taxes by province

A breakdown of the pricing structure for each province and sources of each amount can be found in this Google Sheet.

Alberta

British Columbia

The goods and services tax (GST) is not included in the price on which PST is calculated.

While the most recent mark-up schedule states that the rates for beer are subject to annual CPI adjustments, they have not been adjusted for inflation since at least 2015 and the top-end rate of $1.08/L has been the same since April 1, 2015.

There have been a few changes since 2010 (primarily rate reductions for small producers), but otherwise the taxes have been “revenue neutral”, meaning they haven’t kept up with inflation – effectively lowering alcohol producers’ taxes every year.

Manitoba

New Brunswick

Newfoundland and Labrador

Northwest Territories

Nova Scotia

Nunavut

Ontario

Prince Edward Island

Quebec

Saskatchewan

Yukon

Beer prices increasing due to inflation, minimum prices

Inflation

Automatic increases to excise taxes are a small part of what is increasing the cost of beer in Canada. The cost of input ingredients and materials from the aluminum for canning, carbon dioxide for carbonation, malted barley and hops and even the glassware have been increasing.

Beer prices has been rising since mid 2020 due to these inflationary pressures, having increased almost 7% year-over-year at the end of 2022. They are projected to rise a futher 10% in 2023, according to Beer Canada.

Minimum and uniform prices

Minimum prices

Also known as Social Reference Pricing (SRP), minimum prices are set by provincial governments based on the type, container size, alcohol content to the help reduce alcohol-related harm and cost by reducing or eliminating the incentive to buy higher alcohol content products. Typically, the higher a product’s higher percentage of alcohol, the higher its minimum price is set.

For example, PEI keeps their minimum prices in line with recommendations from the Canadian Institute of Substance Use Research.

In Ontario, retailers cannot sell alcohol for less than its minimum retail price, which varies by type, container size and alcohol content under Ontario Regulation 750/21. These “price floors” are indexed to the average CPI for Ontario over the previous three years.

Uniform prices

The retail price of beer or wine must be the same at all retail stores in Ontario including the LCBO, The Beer Store and grocery stores at all locations throughout the province under Ontario Regulation 750/21. The price is set by the manufacturer and must be greater than the minimum price allowed for the type and size.

Restaurants and bars may pay a different uniform price than the uniform retail prices consumers pay.

Beer industry statistics

85% of the beer consumed in Canada was brewed in Canada in 2020.

Domestic production by year

2.27 billion litres of beer was produced in Canada in 2020 and sales were $2.06 billion in 2021/22.

Beer sales in Canada by volume per person by year

Beer sales per person of legal drinking age have been on the decline in Canada since the early 1970s and remain at an all-time low.

Container deposit has been the same since at least 2009 and the recovery rate is falling

The Beer Store’s (TBS) deposit return system for beer containers started in 1927.

The fees on cans and containers haven’t changed since at least as far back as 2009, and should be about 36% higher when adjusted for inflation:

As per The Beer Store’s Stewardship Reports, the recovery rate of containers has declined gradually year-over-year from a peak performance of 95% in 2009 to 79% in 2021. This means that compared to the peak recovery rate, an estimated 28,554 tonnes was disposed in 2021 that could have been diverted from disposal.

Elsewhere in Canada:

British Columbia

Quebec is modernizing their deposit-refund system, expanding it to include wine, spirits and cider, juice and milk containers, and water bottles and has set mandatory performance targets for producers recovery, reclamation and recycling of these containers with goal of reaching 90%+ by the early 2030s.

How alcohol prices affect health outcomes

In April 2007, the National Alcohol Strategy Working Group, consisting of representatives from the federal and provincial/territorial governments, addictions’ agencies, academia, non-government organizations, liquor boards and the beverage alcohol industry (including Beer Canada), released the National Alcohol Strategy. A revised version is scheduled to be released in 2022.

Alcohol price and taxes are the most important policy levers to combat consumption and harms, including cancer. Studies indicate that higher alcohol prices are strongly associated with lower alcohol consumption. Consumption can be reduced by increasing the price of strong alcohol and lowering the price for light alcohol.

A recent report funded by Health Canada found consuming more than two drinks per week constituted a moderate health risk due to evidence linking alcohol to cancer. These guidelines marked a significant change from the previous understanding that men could have up to 15 drinks per week with low risk, and women up to 10.

• Reducing Alcohol-Related Harm in Canada: Toward a Culture of Moderation – Recommendations for a National Alcohol Strategy - Canadian Centre on Substance Use and Addiction (CCSA)
• National Alcohol Strategy Monitoring Project - CCSA
• Pricing of alcohol in Canada: A comparison of provincial policies and harm-reduction opportunities
• Alcohol Price Policy Series: Reducing Harm to Canadians - CCSA
• Policy actions to reduce alcohol consumption - Canadian Partnership Against Cancer
• How many alcohol-attributable deaths and hospital admissions could be prevented by alternative pricing and taxation policies? Modelling impacts on alcohol consumption, revenues and related harms in Canada - Public Health Agency of Canada, 2020

Summary

I wrote this guide primarily to help clarify how alcohol taxes work and prices are determined in Canada and how much increases to excise taxes actually impact the price that consumers pay for alcohol.

However, I also wrote it to illustrate the lengths to which an industry is willing to go in order to sway public opinion and change government policy in their favour - even when it's about something as small as an increase of $0.01 on a $4 beer.

As Jordan put it, "How bad are the bigs hurting if they’re willing to go to the mat for that small a figure?"

Consider, for a moment, the effort industries may be willing to put in to oppose or implement government policies that will save, or make them money.

Sources

The pricing models used in this report, including all tables, calculations and sources for each input can be found in this Google Sheet.

• What proportion of the price of a typical alcoholic beverage is taxation in Canada and why does it matter? - Public Health Agency of Canada, 2021
• Fun With Numbers: Excise Tax Remittance Edition - Jordan St. John, 2018
• Beer manufacturers, microbrewers and brands - Ontario Open Data
• Hughes v. Liquor Control Board of Ontario: Understanding Beer Retail in Ontario, 2018