Big Alcohol lobby derailed implementation of alcohol tax increase
An increase in the excise duty on alcohol in Canada has been temporarily capped at 2% instead of a planned 6.3% rise.
Canada’s alcohol industry pressured the government to scale back a tax increase that had already been announced. Last week, Movendi International reported that Canada would improve the federal Alcohol Duty Escalator. But alcohol companies and their front groups created a pressure campaign beyond expectations to derail the planned tax increase.
The Trudeau government originally planned to increase the federal beverage alcohol duty by 6.3% on April 1. The federal alcohol duty is separate from provincial liquor board fees and sales taxes.
In Canada, the federal government adjusts the excise tax on alcohol annually to account for inflation, as mandated by law. This measure helps ensure that alcohol does not become cheaper over time – a WHO-recommended element of evidence-based alcohol policy-making.
Win for Big Alcohol lobby on the back of Canadian people
This year’s planned alcohol tax increase would have had the potential to minimize the risk that alcohol companies would just absorb the alcohol tax increase to avoid price increases.
But the government announced a 2% cap on the increased alcohol tax level starting from April 2023. The cap is set to last for a year until it is reassessed by the government towards the end of the stated period.
The decision to declare a temporary pause on the proposed alcohol duty escalator increase is a victory for the alcohol industry, on the back of people and communities in Canada. The decision to scale back the tax increase comes as a result of the lobbying campaign of alcohol companies that they initiated a year ago.
The Big Alcohol lobby pushed for a freeze of the automatic alcohol excise tax increase for two years. It was a who is who of Big Alcohol pressuring the Trudeau government to ignore the public good and instead favor private profits of some of the largest alcohol companies in the world.
Beer Canada, Wine Growers Canada, Spirits Canada – that means alcohol giants AB InBev, Molson Coors, Bacardi, Beam Suntory, Campari Group, Diageo, and Pernod Ricard are behind the campaign to derail the alcohol duty escalator.
And Big Alcohol is pushing further: they want to get rid of the alcohol excise tax tied to inflation altogether, according to CBS reporting.
Keeping alcohol retail prices low only benefits alcohol companies because low prices increases alcohol consumption significantly which drives private profits while fueling alcohol harm in families, communities and society at large..
Larry Summer wrote in the Financial Times about this reality:
Taxing ‘bads’ like tobacco [and alcohol] over ‘goods’ like savings and income is as close to a free lunch as you can get in economics.”
Lawrence H. Summers, in: “To Improve Global Health, Tax the Things That Are Killing Us.“
Implementing escalator tax to level up Canadian federal alcohol duty
Since 2017, the government has implemented automatic annual tax increases on alcohol based on the Consumer Price Index (CPI). When it was first introduced, inflation was sitting in the range of 1% to 1.5%.
As Movendi International reported at the time, in 2017 the Canadian government linked the alcohol excise tax to the inflation rate of the country – after contentious debates in parliament. The so called alcohol duty escalator ensured the consistent increase in the alcohol tax to avoid alcohol becoming cheaper, thus causing more consumption and harms.
Inflation-adjusted alcohol taxation is a proven to help protect public health and socio-economic development because it ensures alcohol affordability is kept low and because it ensures that the real value of the tax revenue collected stays constant over time, as inflation reduces the purchasing power.
As the rate of inflation is rising all over the world, driven by economic effects of the COVID-19 pandemic and the Russian war against Ukraine, the levels of health taxes, such as alcohol taxation, are eroding.
Unless health taxes are adjusted to account for inflation to maintain the real value of taxes, efforts to curb death and disability through targeted taxation will be reversed,” writes Chris Lane of the Center for Global Developemt (CGD).
Chris Lane, Non-Resident Fellow, CGD
Even before these economic crises hit, all over the world, including in Canada, alcohol and other pro-health taxes were too low relative to the costs and consequences of the harm caused by alcohol, tobacco, and sugar-sweetened beverages (SSBs).
The Canadian alcohol duty escalator was intended to prevent the erosion of the value and effectiveness of the federal alcohol taxes due to inflation. Big Alcohol interferences has derailed this effect with serious consequences for the health and economy of people and country.
Data from the World Health Organization shows that rising alcohol affordability drives an increase in alcohol consumption
That is why reducing alcohol affordability is one of the best ways to reduce population-level alcohol use. In doing so government’s can effectivley prevent and reduce alcohol harm – something Canada badly needs.
Alcohol tax cap hinders efforts to address huge social and economic costs of alcohol in Canada
The harm and costs due to alcohol are receiving increasing attention in Canada, especially since the release of the improved guidelines for low-risk alcohol use. For example, the brand new report on the costs and harm of alcohol and other harmful substances reveals the heavy alcohol burden and has sparked another public debate about alcohol.
The report reveals that alcohol causes the largest overall costs to society – even bigger than costs due to tobacco-related harm.
- In 2020, over 62% of the total costs of harmful substances were due to alcohol and tobacco.
- Alcohol accounted for $19.7 billion or 40.1% of the total costs;
- Tobacco accounted for $11.2 billion or 22.7% of the total costs;
- Opioids accounted for $7.1 billion or 14.4% of the total costs; and
- Cocaine accounted for $4.2 billion or 8.5% of the total costs.
Alcohol caused more than 17,000 deaths in 2020. And alcohol and tobacco accounted for over 85% of all deaths due to harmful substances.
Alcohol as a driving factor behind loss of productivity
The costs caused by alcohol consists of healthcare costs, lost productivity costs, criminal justice costs, as well as other direct costs.
While the Canadian budget 2023 predicts large deficits due to the weak economic situation of the country, the Trudeau government gave another gift to Big Alcohol by not reducing the alcohol tax. Finance Minister Chrystia Freeland tabled a federal budget projecting a deficit about $10 billion higher than initially forecast, as per CBS News reporting.
Facing such economic pressure, the government would need improved fiscal policies to reduce avoidable costs, such as alcohol’s healthcare, criminal justice, and economic costs.
Healthcare costs include in-patient hospitalizations, day surgeries, emergency department visits, paramedic services, and specialized treatment for alcohol use disorder.
- Healthcare costs due to harmful substances were $13.4 billion (27.3% of the total cost of harmful substances).
- Alcohol ($6.3 billion) and tobacco ($5.4 billion) contributed about 87% of those costs.
Costs due to lost productivity are based on the lost value of work due to premature death, long-term disability and short-term disability (absenteeism and impaired job performance or “presenteeism”).
- Lost productivity costs due to harmful substances amounted to $22.4 billion.
- Alcohol and tobacco contributed about 60% of all lost productivity costs.
The per capita lost productivity costs caused by alcohol increased by 22.8%, from $169 per person in 2007 to $207 per person in 2020.
At the national level, the costs of lost productivity due to alcohol is the highest ($7.9 billion) among all other harmful substances, amounting to 35% of the total lost productivity costs in Canada in 2020.
Criminal justice costs include costs linked with policing, courts and correctional services.
- Alcohol accounted for the greatest costs to the criminal justice system at nearly $4.0 billion or 39.8% of all criminal justice costs.
Other direct costs related to harmful substances include costs across several categories, including research and prevention, fire damage, damage to motor vehicles, social assistance for substance use-attributable disability and workplace costs not already covered in lost productivity (e.g., employee assistance programs, drug testing programs and administrative costs associated with workers’ compensation).
- Alcohol harm contributed 47.3% of other direct costs, followed by tobacco at 14.2%.
Alcohol and tobacco harm accounted for at least 60% of the total per-person cost of harmful substances in Canada (roughly $25 billion to $30 billion per year) for the past 14 years.
However, costs attributable to alcohol harm rose more than 21% while those linked with tobacco harm declined the most of any substance examined (nearly 20%).
The potential of evidence-based government action
These divergent trends are not surprising. The government introduced a range of public health policies to prevent and reduce tobacco use — including warning labels, increased taxation and advertising restrictions. Similar policies for alcohol do not exist or have remained unchanged for many years. In fact, alcohol consumption and sales increased during the pandemic, and were associated with increased rates of new COVID-19 infections two weeks later.
This puts the government’s decision to cap the alcohol duty escalator into context: the total per-person costs caused by alcohol to Canadian society rose by 21.3% from $427 to $518.
Lessons learned from this whole-of-society response to tobacco could be applied to address the economic and physical availability of alcohol and better inform people in Canada about the health risks of alcohol use.
These findings illustrate the importance of prioritizing policies aimed at preventing and reducing alcohol harm. Policies such as evicdence-based alcohol taxation would lead to the most widespread reduction in the harms and economic burden of alcohol in Canada.
Costs of alcohol use have continued to rise alongside deregulatory policies and availability, a trend that escalated during the COVID-19 pandemic (Stockwell et al, 2022).
Alarming figures and the need for addressing the overlooked epidemic of female employees‘ lost productivity due to alcohol use
The new figures are alarming as they highlight the need for greater focus on alcohol prevention and treatment efforts in the workplace. These figures also place the 2% cap on the planned alcohol tax increase at odds with the need to address the staggering economic costs of lost productivity due to alcohol.
Our estimates show not only how substance use affects the healthcare and criminal justice systems but also the ability of people in Canada to work and contribute to the economy,” said Emily Biggar, CCSA Research and Policy Analyst and a researcher for the report, as per Financial Post.
Initiatives across the spectrum of prevention, harm reduction and treatment are needed to improve the health and productivity of people in Canada.”
Emily Biggar, Research and Policy Analyst, CCSA
Alcohol harm in the workplace is growing problem, especially among Canadian women. Toronto-based sobriety coach Amy C. Willis says that alcohol use by women has reached a similar patter as that of men, according to The Globe and Mail reporting. Men are associated with heavy alcohol use patterns and alcohol dependence issues linked to the workplace.
And women’s rising alcohol use is taking a growing toll on work-related performance as mental and physical health deteriorate. The 2018 Chief Public Health Officer report revealed that alcohol deaths among women increased by 26% between 2001 and 2017.
We do know that [alcohol use] among women has increased steadily in recent years,” says Dr. Talia Varley, physician lead for advisory services at Cleveland Clinic Canada, as per The Globe and Mail.
There’s a mix of hard and soft data out of Canada and a lot of other reinforcing data points around this growing issue coming from the U.S. as well.”
Dr. Talia Varley, physician lead for advisory services, Cleveland Clinic Canada
Alcohol use problems of female employees has gone unnoticed for too long. In reality, a disproportionate number of women might be experiencing alcohol-related issues at the workplace. Women are a vulnerable group who need special treatment and attention of alcohol prevention groups and policy makers.
At the same time, studies show women can boost their mental health by going alcohol-free completely.
Seen from the vantage point of lost productivity, it is apparent that alcohol use has far-reaching and under-recognized consequences that span across several dimensions in Canada. Alcohol harm extends beyond the individual health consequences to societal and economic costs of the country, that often become prevalent in workplaces.
Government options to prevent and reduce alcohol harm
There is enormous untapped potential in countries like Canada for the implementation of proven strategies to prevent and reduce alcohol-related harm. While alcohol policies have been worsened in Canada during the COVID-19 pandemic, society now needs to use the full potential of public health-inspired policies with proven effectiveness and potential economic benefits.
Scientific analysis from 2021 provided a formal assessment of effective government action on alcohol across Canadian jurisdictions.
Canadian governments collectively received a failing grade (F) for alcohol policy implementation during the assessment. However, had the best practices observed in any one jurisdiction been implemented consistently, Canada would have received an A grade.
Failure to implement effective alcohol policies was due to, among others:
- Lack of government regulatory mechanisms to implement effective policies, and
- Alcohol industry lobbying.
Both of these factors are again at play in the derailing of a much-needed alcohol taxation improvement. How much it is needed is felt by people and communities in Canada every day and borne out by scientific analysis.
Sources
The Star: “Battle of the bottle: How Canada’s alcohol industry got the Trudeau government to scale back a tax increase“
CBS: “Excise tax tied to inflation should be axed for good, say B.C. brewers, wine producers“
Just Drinks: “Canada caps alcohol tax increase“
Spirits Business: “Canada caps alcohol tax for one year“
Now Toronto: “Canadian alcohol excise tax temporarily capped at 2% after backlash“
Financial Post: “Lost Productivity Due to Substance Use Cost the Canadian Economy $22.4 billion: New Report“
Canadian Substance Use Costs and Harms Scientific Working Group. (2023). Canadian substance use costs and harms 2007–2020. (Prepared by the Canadian Institute for Substance Use Research and the Canadian Centre on Substance Use and Addiction.) Ottawa, Ont.: Canadian Centre on Substance Use and Addiction.
The Globe and Mail: “Women are drinking more, but alcohol addiction is still a taboo subject in the workplace“
Stockwell T, Giesbrecht N, Vallance K, Wettlaufer A. Government Options to Reduce the Impact of Alcohol on Human Health: Obstacles to Effective Policy Implementation. Nutrients. 2021; 13(8):2846. https://doi.org/10.3390/nu13082846
