Sin-taxes, across all sectors, are fairly excessive in Canada. At almost every turn the government sinks its tax teeth into the process of you purchasing the products you like. This is true for cannabis products, alcohol, tobacco, vaping, gas, and annoyingly so, non-alcoholic beer. Yes, non-alcoholic beer in Canada is not exempt from federal excise taxes.
You read that right. The federal government also extends its sin-tax regime for non-alcoholic beer, at a rate of $2.82/hectolitre.
The application of excise taxes for non-alcoholic beer is problematic for a variety of reasons. The first, and most glaring, is that it is hypocritical given that the federal government has exempted non-alcoholic wine and spirits from the excise tax. Why apply it for beer, but not wine and spirits? Obviously, a more consistent approach would be to simply exempt all non-alcoholic beverages from the excise tax, because the purpose of the sin tax is to recover alcohol-related healthcare costs. That said, there are no alcohol-related healthcare costs at all from non-alcoholic beer, which immediately shows the lunacy of sin-taxing these products.
In addition to correcting hypocrisy, removing the excise tax for non-alcoholic beer would put federal policy in line with how the provinces treat these products. Provincial regulators, including Alberta, don’t require non-alcoholic beverages to be sold at licensed alcohol retail outlets, because they’ve accepted the obvious that these products don’t have alcohol in them and thus shouldn’t be strictly regulated. That is why in Alberta these products are often sold alongside carbonated water and pop. Removing the excise tax would be the federal government following the lead of the provinces in treating non-alcoholic beer differently than beer, because they are in fact different.
On the industry side, the federal excise tax acts as a barrier for product development in Canada, mostly because other beer producing jurisdictions (US,EU,UK) don’t tax non-alcoholic beer. Because of this the domestic industry in those jurisdictions has flourished, offering consumers more choice and at better prices. Their sane tax policy, coupled with increased consumer demand, is in large part why the non-alcoholic beer market is expected to grow to over $4 billion by 2025. These drinks aren’t just for hipsters, designated drivers and pregnant women anymore.
Lastly, and most importantly, is how non-alcoholic beer is yet another example of new products reducing harm for consumers. And while I don’t personally enjoy these drinks, I can see why someone would still want to enjoy a beer with their friends, or at a bar, without the alcohol that comes along with it.
From a harm reduction perspective, it makes perfect sense to have different tax strategies for products that vary in risk. The Trudeau government, at times, has championed harm reduction for illegal drugs but appears to have a blind spot when it comes to legal substances. This is an uncomfortable trend from Ottawa that is perfectly exemplified by the excise tax on non-alcoholic beer. Ottawa has kept the excise tax system for non-smokable THC cannabis products, like edibles and beverages, despite the fact they are significantly less harmful. They’ve sought to ban vape flavours, despite the fact that vaping is 95% less harmful than smoking, and flavours are an incredibly useful tool for adult smokers trying to quit.
Across the board, we should expect better from Ottawa, and the tax on non-alcoholic beer is yet another example of where they’ve gotten it wrong. Hopefully, come Budget 2022, they can correct this mistake and remove the excise tax from these products entirely.
David Clement is a columnist for the Western Standard and the North American Affairs Manager with the Consumer Choice Center