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Alberta’s new beer tax system is more trouble than it’s worth.
The NDP government’s decision to change its beer tax system can not only increase hostility between provinces, it can do the opposite of what it originally intended. It can hurt the local economy.
Before we begin to examine its effects, let’s recall what actually happened.
The beer markup
It happened on the 12th of July. Alberta’s Finance Minister Joe Ceci gave the order to the Alberta Gaming and Liquor Commission to set a $1.25 per liter markup on all beer in Alberta from August 5. Compared to the previous markup of cents, this was over a thousand percent increase.
The government announced that the tax would apply on all beer manufacturers, from small local breweries to large multinational beer companies. The government also vowed to turn the money collected from the tax into a grant for Alberta’s small breweries.
This new regulation may sound extremely convoluted. And it is. It was designed that way to backtrack from a previous protectionist government regulation that was flat out unconstitutional.
Same product in new packaging
The latest beer regulation by Alberta government has the same objectives as the previous failed attempt. It wants to promote locally crafted beer. But at what cost?
In October last year, the NDP government announced that it would increase the taxes on all beer imported outside of Alberta, British Colombia, and Saskatchewan. It was a classical protectionist measure aimed at supporting locally produced beer by trying to take out its competitors.
And it was also illegal.
According to the Canadian Constitution Foundation (CCF), the tariff was unconstitutional as it violated the section 121 of Constitution Act, 1867 which states “all articles of the growth, produce or manufacture of any one of the provinces shall … be admitted free into each of the other provinces.”
The provision in the Constitution was aimed at promoting free trade and preventing any conflict between the provinces over trade regulations.
Towards provincial disunity
The government may have found a way to circumvent this particular barrier, although some claim it’s still illegal, it does little to prevent a potential conflict between the provinces, particularly Alberta and Saskatchewan.
This is what Saskatchewan’s Minister of Crown Investments, Don McMorris, firmly believes. Terming the whole endeavor “bad news,” he said that the decision to increase the tariff will hurt many of Saskatchewan’s small brewers. He said:
“Alberta’s new beer pricing and grant policy are a trade issue that could hurt producers and consumers in both provinces…This would mean higher prices and less selection for Alberta consumers, as out-of-province breweries will be forced to reconsider that market after having been placed at a significant economic disadvantage to their Alberta counterparts.”
Improving the local economy?
The government of Alberta claims that the decision is a part of a series of “ongoing efforts to promote local jobs, economic development and trade consistency.”
The crucial question, however, is: can it achieve all that?
The example of the October 2015 decision springs to mind. As a result of the order to raise the taxes for beers imported from outside the New West Partnership, Muskoka Brewery had to close down its operations in Alberta due to increased prices, costing many Albertans their jobs.
Is history going to repeat itself?