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John Ivison: Liberals Could Show Canadians They Really Care by Freezing Beer Taxes

politics
Opinion

Abolishing the escalator tax on beer would be an easy, inexpensive win for a government accused of being aloof and distant

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It is a risky business for any government to lose touch, because survival depends on staying in touch.

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That’s why last week’s Abacus Data poll was so eye-catching – it found that 72 percent of voters think the Trudeau government isn’t focused enough on the cost-of-living crisis. The poll found that half of current Liberal voters feel the same way. The numbers were comparable for other issues Canadians care about, such as housing and health care.

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The government is more vulnerable to accusations of being distant and distant than at any point since it was elected in 2015.

The fight against health care will begin this week with prime ministers and a likely new multi-billion dollar deal on funding at the summit.

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But trying to persuade voters that the government is trying to make their lives easier will be more difficult – particularly as Treasury Secretary Chrystia Freeland has already indicated that her spring budget will “account for our call not to add fuel to the fire.” pour inflation” and force the central bank to raise interest rates again.

What liberals need is a token measure that affects the maximum number of people, but is marginal enough not to be inflationary.

A useful way of calming the resentment would be to freeze beer prices – or at least the federal beer tax.

A 2% tax on beer, wine and spirits was introduced by then Treasury Secretary Bill Morneau in 2017, with the additional stipulation that prices would increase with the rate of inflation each year thereafter. Beer and other alcoholic products are the only manufactured foods subject to tax rates that are automatically adjusted for inflation each year, removing Parliament from voting on the issue.

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Tax indexing is great for finance ministers who never have to take responsibility for future tax increases. But governments comfortable with inflation-fed revenues should be challenged by taxpayers.

When the escalator tax was introduced, neither Morneau nor his department expected inflation to rise so spectacularly. This April, the federal excise tax on beer, wine and spirits will rise 6.3 percent, putting another strain on family budgets.

The hospitality industry and breweries have lobbied for Ottawa to freeze the escalator tax until inflation returns to the Bank of Canada’s one to three percent range, noting there are limits to rising production costs. Increased utility and raw material costs have already pushed up prices – According to Statistics Canada, the price of beer served in licensed establishments rose 5.1 percent in the year to December 2022 and 6.9 percent for beer served in licensed establishments bought in stores. At the same time, demand is declining – in the second year of 2020/21 to an all-time low in beer sales.

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The Canadian Union of Brewing and General Workers wrote to Justin Trudeau last week urging him to “do what’s right for brewery workers and keep beer affordable for all Canadians.”

“We are headed for a recession. The federal government must avoid aggravating the situation,” wrote CUBGW President Gaurav Sharma.

A freeze would theoretically result in a small real price reduction, which would legitimately allow the government to claim that it is reducing the cost of a brew (albeit from the price it would have risen to under its paltry tax).

The beer lobby was smart and called for a freeze rather than the escalator abolition. There is support in the Liberal faction and the Treasury Department acknowledges that the tax revenue was not part of their grand scheme.

It would be a surprise if the Liberals failed to achieve an easy and inexpensive victory. But this is a government used to confusing, so don’t raise a glass just yet.

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Source: vancouversun.com

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