Northeastern Ontario craft brewers look for relief from high provincial taxes

Mike Perreault, the director of business operations and co-founder of Gateway City Brewery in North Bay, Ont., knew when he was getting into the craft beer business that taxes were going to be high. 

"We're actually triple indexed for tax on a lot of things," Perreault said. "The majority of tax that we pay on beer is Ontario tax." 

In Ontario, taxes for breweries include a basic beer tax (39.5 cents per litre) and a beer volume tax (17.6 cents per litre).

When applicable, an environmental tax must be paid (8.93 cents for each non-refillable container used to package beer) regardless of the size of the brewery.

Other provinces, including Alberta and British Columbia, have moved to a tiered tax structure that adjusts to the size of the brewery and how much beer it produces.

"We pay somewhere between $5,000 to $10,000 in tax per month and we're a small brewery," Perreault said. 

The Ontario Craft Brewers Association, of which Gateway City Brewery is a member, is calling on the province to revise its beer tax system. 

"It's an old-fashioned tax but I think it needs to be reformed," he said. 

Perreault added the association is looking to push for a removal of the environmental tax.

Brown bottles and kegs are not included. 

The majority of the industry is moving toward cans as aluminum is more of a sustainable and affordable option than glass, Perreault tells CBC.

For Luc Johnson, founder of Whiskeyjack Beer Company in Haileybury, the environmental levy doubles as he sells his beer through the LCBO as well.  

To put the cost into perspective, Johnson broke down the cost per 473 mL can. 

He said with the basic beer tax, volume tax and environment tax combined, he pays about 36.05 cents in taxes per can. 

This sum excludes the cost of ingredients, transportation, packaging and additional fees that are implied when selling through the LCBO.

"We're making maybe 23 cents a can at the end of the day," he said. 

"I don't think the end consumer really knows how much of that beer can cost is going to the government." 

Provinces held off recent rate increases 

In a statement to CBC Toronto, Ontario's Ministry of Finance said, "The government is committed to increasing choice and convenience for consumers and providing support for businesses."

The statement added that the province paused a scheduled beer tax increase put in place by the previous government, cancelled an increase in 2018 that would have increased rates by three cents per litre and delayed resuming annual increases earlier this year. 

But despite that and the reduced micro brewing rates that apply to Perreault's brewery, "it's still not enough". 

Microbreweries like Perreault's and Johnson's fear that a beer tax hike could eventually make it unsustainable for small business owners to remain open.

"I would be forced to either move to another province, which has a completely different taxing system, or just not sell through the LCBO and hope that people come right to my store to buy it," Johnson said. 

Beer is a luxury item. For most people it is not essential- Mike Perreault, Co-founder of Gateway City Brewery

Perreault added the tax reform would allow brewers to be a lot more competitive in the marketplace. 

Johnson said the high tax puts small producers in a tough situation, where they have to either increase production volume and sell more, or pass those expenses onto consumers. 

"The only other option is to reduce our ingredient cost by buying cheaper ingredients."

That's something Johnson is not willing to do.  

"Beer is a luxury item. For most people it is not essential," Perreault said. 

He said a rise in the cost of living has forced many to start budgeting their money and tightening their spending. 

"Lowering that tax burden will help us keep those prices down and help keep customers coming in."