- News Release 2006-027 -

Archived - Federal Excise Duty on Beer

Background

Excise duty is imposed under the Excise Act on beer produced in Canada. The duty is payable at the time of packaging. Exports are exempt. In the case of imported beer, the duty is levied under the Customs Tariff at the time of importation.

Budget 2006 Measures

Rate Increase to Offset GST Reduction

Budget 2006 proposed to increase alcohol excise duties on July 1, 2006, to offset the impact of the GST rate reduction. The increases in excise duties maintain the overall current federal tax burden on these products.

For regular-strength beer (greater than 2.5 per cent alcohol by volume), the excise duty was increased by 3.2 cents per litre (from 27.99 cents per litre to 31.22 cents per litre). On a typical 24-pack of 341 ml bottles of beer, the increase in excise duty amounts to about 26 cents.

Overall, the alcohol duty increases are designed to be revenue-neutral following the GST reduction. The federal tax burden on beer products will remain about the same as it is now.

Excise Relief for Canadian Beer

Budget 2006 proposed to reduce duty on beer produced by small and mid-sized Canadian brewers. The relief would apply to brewers producing no more than 300,000 hectolitres per year. The relief would begin at 90 per cent for the first 2,000 hectolitres and decline in stages to a reduction of 15 per cent in the excise duty rate on production from 50,001 to 75,000 hectolitres per year. After consultation with industry, it was decided to eliminate the 300,000 hectolitre qualification threshold to expand the scope of the relief to include all Canadian brewers. The relief will come into effect on July 1, 2006.

Expansion of the relief will help the competitiveness of Canadian brewers by reducing the excise duty on their product (as of July 1, 2006). All Canadian brewers will enjoy excise duty savings of about $2.30 on a 24-pack of 341 ml bottles on their first 2,000 hectolitres of production per year.

The estimated value of the additional relief is $4.5 million, for total tax savings of nearly $18 million in the first full year of this measure.

- News Release 2006-027 -