Hi there! Aren’t you angry about TAXES? The Toronto Sun this morning says you should be angry! About TAXES! Taxes on companies which go to pay for roads that they use?! Taxes that pay for your aunt Barb’s splenectomy?! ANGRY! TAXES! RABBLE!

Beer Canada would sure like you to be angry about taxes. They have a petition out called “Axe the Escalating Beer Tax” which suggests that you pay 47% in beer tax! My gosh that sure seems like a lot of tax on beer doesn’t it? You’re being bamboozled!

Rather than getting out the pitchforks and torches, my instinct when presented with a lobbying group that represents a very small number of brewers anchored by some very large brewers indeed is to get out the calculator.

The idea behind this petition is that 47% of the cost of beer is tax on average throughout Canada and that there’s an escalating beer tax which will drive that percentage ever higher. Now there are a lot of reasons that this is wrong, but I’m going to name just a couple that should make you properly angry.

First of all, let’s establish there is no average beer price across Canada. Because all of the provinces have different needs and requirements for remittance of excise, the amount of excise paid in each province is different. There are two! Federal and Provincial. Now, each province is different in terms of population as well. No matter what the rate of excise taxation is in New Brunswick, the amount of revenue generated will be greater in Ontario despite a lesser rate. The population is much greater. The 47% average rate that they have come up with is not based on sales figures, but rather on the hypothetical price, tax and markups on the top ten brands in each province.

What this means is that for the purpose of this study, Beer Canada has chosen the top ten selling brands in each province and decided to run with those as examples. Let us see, according to The Beer Store what those top ten brands might look like in Ontario: Coors Light, Molson Canadian, Budweiser, Bud Light, Blue, Carling Lager, Busch Lager, Keiths, Heineken and Corona.

Let’s see if we can’t figure out what might be wrong with that picture. Well, for one thing, there are three MolsonCoors owned brands (Coors Light, Molson Canadian, Carling Lager) and five AB InBev owned brands (Budweiser, Bud Light, Blue, Busch Lager, Keiths). Hey, wait. Who distributes Heineken in Canada? MolsonCoors. And Corona? Who distributes Corona? Much thanks to eagle eyed reader Troy Burtch for pointing out that it is in fact Labatt. We can let them off the hook as they’re not represented by Beer Canada.

Well, you might say, Ontario isn’t Canada. Ontario is Ontario. Well, it’s good that they’re talking about a universally applicable escalating FEDERAL rate, then, isn’t it?

Let’s have a look at this table which is freely available on the government’s website and which I have yet to see referenced by any legitimate media.

Goodness, that’s a lot. $31.84 a hectolitre in federal excise tax on beer over 2.5%. You are meant to be jumping up and down saying “what an outrage!” Except that that a hectolitre is 100 litres or 200 pints of beer. That comes out to about 16 cents of federal excise taxation per pint of beer. Say, what’s the price of a pint of beer again? Somewhere between seven and eight dollars? Well, that’s a nonsensical made up figure. Let’s play Beer Canada’s game and get an average figure for the non-import brands in the top ten in Ontario.

Well, first of all, let’s all feign amazement that people are paying a premium for Keith’s. Then, let’s do the math. Wow! The average price of a case of beer is $36.50 if you go by the examples that Beer Canada have used. Now, let’s see. 24 x 341ml = 8,184 ml. How many ml in a HL? Wow. That’s 12.218 cases of beer per hectolitre. That’s 293 bottles and a low fill! Hmmm. What’s $31.84/293? Oh wow. It’s 10.8 cents a bottle in federal excise! 

But it’s going to go up 1.5% right? Hmm. $31.84 * 1.015 = $32.32 per hectolitre. 16.1 cents a pint! You’re bankrupting me with your 0.1 cents! Goddamn you, government! What about bottles? You mean it goes from 10.8 cents to 11 cents a bottle, essentially remaining at the same amount because there’s no way to pay less than a penny? In order for that to cost you ten bucks next year you would need to drink 143 cases of beer.  What hath taxation wrought that I must pay ten dollars to drink 3,432 bottles of beer?! 

Goodness, it’s a miracle that craft brewers are able to operate at all given that $31.84 per HL taxation rate?

What’s that you say? There are no craft brewers in that top ten SKU situation that this entire nonsense is ginned up on? Could it be that there is a subsequent table on the federal government website. Let’s perform the intensely difficult journalistic task of scrolling down slightly.

Wait, you mean that federal excise taxation doesn’t work the way that Beer Canada is describing and that the vast majority of Canada’s 700 or so breweries don’t get taxed currently at the rate of $31.84 per HL because there are brackets based on production level?! Are you suggesting that a lobbying group representing large brewers would mislead the public intentionally? Heavens forfend!

Here’s the thing, gentle reader. Let us assume that the very large brewing corporations represented in the top ten SKUs are each making something like 2.5 million HL of beer annually in Ontario. Why, if you multiply that figure which I have plucked out of the air by $31.84 you get a figure of $79,600,000. Nearly 80 million dollars. If you multiply it by $32.32, you get $80,800,000. Nearly 81 million dollars.

The difference in payment to the federal government on the behalf of the very large brewing corporations (which are headquartered in other countries, by the way, despite being represented by Beer Canada) is about 1.2 million dollars a year. It would not even pay for the CEO’s bonus. It would not pay for a house in midtown Toronto. Molson Coors had third quarter net sales of 2.88 billion dollars in 2017. I’m sure 1.2 million bucks is going to bankrupt ‘em.

“But!” I hear you say. “What about the annual increase? It compounds, don’t you know!”

Let’s chat about that for a second. An annual increase of 1.5% on federal excise taxation is essentially a COI increase about a penny a bottle. You want to talk about damage to the consumer? Do you remember around 2007 when the big brewers started lobbying for minimum price floor for value brands in Ontario? Well, they got that condition approved. The minimum price of 24 bottles of beer in Ontario has gone from 24 dollars in 2009 to 34.50 in 2018. That is an increase in just under a decade on people who buy in that category of a factor of 1.4375. You’re paying 43.75% more for value brand beer than you were a decade ago. They have simply pocketed that. It might also have something to do with why sales are down 10% over the last decade. 

Beer Canada is attempting to make you angry about the fact that their largest members are going to be paying about three tenths of a cent more per bottle of beer in excise tax next year. If that gets passed along to you, the rise you can expect is about a dime per case of beer and that’s rounding up, and that’s a worst case scenario.

In order to save Labatt and Molson about 1.2 million bucks a year (in Ontario, mind you) Beer Canada is attempting to drum up outrage at the federal government over an amount that if passed directly on to the consumer in a forthright manner is negligible. In order to do that, they are attempting to convince you that taxing large multinational corporations who until very recently had a defacto monopoly on beer sales in the province of Ontario is a bad thing.

Now, if I were a small brewer who was a member of Beer Canada I might now be wondering, do I wish to be represented by a group that is attempting to turn the public against their own best interest in order to give my largest competition a disproportionate advantage over me? When Luke Harford says on behalf of Beer Canada that sales are flat, I’ll ask you if you’ve noticed any small brewers who aren’t growing. Does that jibe with your sense of reality when 150 breweries have opened in the province over the last three years?

Look, folks. If you want to pay less indirect federal excise tax, give your money to smaller brewers who pay a lesser rate. There. You stuck it to the man and drank something tasty.

Also, consider this: How bad are the bigs hurting if they’re willing to go to the mat for that small a figure?