Tax in the News: A Sigh of Relief in the Foodservice Industry: A Look at the Federal Excise Tax Cap on Alcohol

Pierre Poilievre, the Leader of the Opposition, often quips that the Liberal government’s tax policies are enough to drive a person to drink, jesting that even that refuge is under siege by taxes. Yet, in a surprising turn of events, the federal government has thrown a lifeline to the beleaguered foodservice industry by maintaining the alcohol excise tax at a manageable 2%. This decision, ardently advocated for by Restaurants Canada alongside a diverse coalition of stakeholders, signals a rare moment of relief amid a series of financial hurdles that have plagued the industry in recent years.

Restaurants Canada has tirelessly championed this cause, understanding the profound impact that excessive taxation can have on an industry already on the brink. Kelly Higginson, President and CEO of Restaurants Canada, encapsulated the sentiment of many when she expressed gratitude for this decision, noting, “The cap on the alcohol tax gives operators a chance to catch their breath. For the past four years, restaurants have been dealt one blow after another.” It’s an acknowledgment of the harsh reality that 62% of restaurants in Canada are operating at a loss or barely breaking even today, a stark contrast to the 12% pre-pandemic. These figures paint a grim picture of the challenges faced by an industry that serves as the backbone of our communities, embodying dreams, passions, and the essence of social life.

The spiraling cost of food coupled with record-high inflation has rendered operating a restaurant more expensive than ever. In this context, the federal government’s decision to cap the excise tax on alcohol emerges not just as a policy measure but as a lifeline to an industry gasping for air. This cap benefits not only restaurant operators but also Canadians who cherish the simple pleasures of sharing a glass of wine on special occasions or unwinding with a pint of beer after a long day at work. It’s a testament to the power of collaborative advocacy, with Restaurants Canada, brewers, unions, consumers, farmers, and retailers coming together to voice a unified plea for support.

The efforts of Rechie Valdez, the Minister of Small Business, and Finance Minister Chrystia Freeland, have been pivotal in bringing this issue to the forefront and ensuring the survival of an industry navigating through turbulent times. Their commitment has been lauded by industry stakeholders, with Higginson extending a heartfelt thank you on behalf of Restaurants Canada’s members. This decision is a beacon of hope for restaurants across Canadian cities and towns, regardless of their size, offering a momentary reprieve as they strive to overcome the adversities presented by the current economic landscape.

In the grand tapestry of government policy and its impact on small businesses, the cap on the alcohol excise tax stands out as a moment where advocacy and government action converged to support an industry in dire need. It’s a reminder that, in the midst of challenges, there are opportunities for collaboration and support that can lead to meaningful outcomes for communities across Canada.

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Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.