After narrowly avoiding a move in the Senate to split its budget implementation bill, the Liberal government is now staring down new amendments that would remove automatic annual hikes to excise duties on alcohol.

The Senate's national finance committee Tuesday passed the amendments by a narrow 9-7 majority vote in defiance of Prime Minister Justin Trudeau, who has said unelected senators should keep their hands off budget bills.

Senators accepted the government's proposal for a two per cent increase to the duty applied to the cost of wine, beer and spirits, but rejected plans to tie the tax to the rate of inflation in future years.

The amended bill will now return to the Senate for third reading, where it will face a vote by the full Senate.

'Slippery slope'

The amendments were introduced by Conservative Newfoundland Senator Elizabeth Marshall. In an interview with CBC News after the committee meeting, Marshall said it's "fair game" for the Red Chamber to amend a budget bill passed by the House of Commons, adding it's well within the rules for senators to amend government legislation of any sort.

She rejected Finance Minister Bill Morneau's assertion at committee last week that many federal government expenditures increase by the rate of inflation each year — namely public service salaries and pension payouts — and so too should the taxes it collects.

"If governments want to increase any taxes they should come back to Parliament every year and justify it," said Marshall, a former Newfoundland auditor general. "I don't think [a yearly hike] should be buried in one budget bill. What are we going to see next year? It's a slippery slope.

"It's something I felt very strongly about I put forward the amendments and they got through committee and let's see where it goes from here."

Elizabeth Marshall

Newfoundland Senator Elizabeth Marshall, who moved the amendment, says the finance minister should seek approval of Parliament each time for yearly tax increases. (Senate of Canada)

A number of senators, from all sides of the political spectrum, have opposed these inflationary tax measures, saying they are too onerous on consumers, brewers, wineries and liquor makers and the tourism industry. At least two Independent senators appointed by Trudeau, and a number of Liberal senators have said they are opposed to the tax hike.

If the amended bill is passed, the legislation will return to the House, where the amendment can either be accepted or rejected by MPs.

The government has said the cost to consumers will be minimal, adding only a penny to the price for a litre of wine, for example, seven cents to a 750-millilitre bottle of spirits and five cents to a 24-case of beer.

But some senators have argued that when provincial mark-ups and HST are applied on top of the excise duty, the price of beer will actually increase by roughly 12 cents, with guaranteed increases each year in perpetuity without the need for the finance minister to table those increases in Parliament.

Infrastructure bank untouched

Independent Quebec Senator André Pratte, who was behind the failed move to split the budget bill and separate the infrastructure bank out for further study, backed off introducing an amendment to the legislation Tuesday.

The former journalist said while he was "disappointed" his motion failed — conceding he thought he had enough support to win — he now realizes there is little appetite to tinker with the bank's creation.

"I could have pushed it and brought amendments, but the government indicated very clearly that they would reject it. I made my point pretty clear over the last few weeks and it would have been fruitless, and would only delay the inevitable," Pratte said in an interview with CBC News. "It would have been a waste of time."

"I was not totally reassured [about the government's plan to create the infrastructure bank], but obviously many senators were and in the end that's what counted."

Pratte added that he believes Marshall's amendments on the excise duties will pass the Senate because of cross-party support, including from some members of his own Independent Senators Group.