The owner of a P.E.I. brewery says pending annual increases to the federal beer tax will be damaging to small craft breweries.
"It's counter-productive to growing economy, creating jobs, and right now, there's no rationale to be putting an automatic tax on and that it goes up every year, automatically. Crazy," said the P.E.I. Brewing Company's Kevin Murphy.
The federal tax on domestic and imported beer rose by two per cent last year as part of the 2017 budget. It will continue to increase every year in line with inflation starting this April.
Beer Canada says almost half of what consumers currently pay for beer is tax, and as the federal tax increases, consumers will have to pay even more for their brew.
The tax hikes come in the wake of a new study released by the Conference Board of Canada suggesting beer consumption per capita has also dropped about 10 per cent in the last 10 years.
Given the drop in consumption, Murphy said this is not the time to be elevating beer taxes.
"This is a category that we're trying to hold and maintain but when you're seeing the macro issues that are affecting the sector of beer and then you get taxes being tacked onto it in this tough economy, with regards to trying to keep beer growing as a segment — it's a tough job to do."
'There's a tipping point'
When taxes go up, Murphy said those costs are passed on to the consumer. If costs continue to rise, he said the volume will drop.
"No matter what industry you're in, there's a tipping point with regards to what the consumer will pay."
He said small, local craft breweries that employ three or four people will be hardest hit by any negative ripple effect of the annual federal tax hike.
"This is not easy to get these breweries so that they're profitable and you can make sure that they're sustainable and you're here for the long term."
'Supportive of axing the tax'
Beer Canada, which represents the brewers that account for 90 per cent of the beer made in Canada, has launched a campaign this week asking consumers to sign a petition calling on Finance Minister Bill Morneau to scrap the tax increase.
Murphy fully supports this petition.
"I couldn't agree more with it.... We are supportive of axing the tax," he said. "You know, the government has a right to have some taxes, and they get lots of taxes, but to use it as a growing income stream for their general revenue — it's ill conceived."
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