If you grew up in Canada, then you’re probably used to the hefty liquor taxes imposed by most provinces.
In some areas, such as Nunavut, it’s not uncommon for a bottle of vodka to go for well over $100 (and that’s not top-shelf vodka, either). So how much is the liquor tax in Canada?
Although the federal government doesn’t charge separate liquor taxes, most Canadian provinces and territories have implemented liquor taxes between 5% and 61.5%.
Before you visit the liquor store or go out for a night of drinking at the bar, it’s a good idea to know what type of taxes to expect. Below, I’ll explain everything you need to know about the liquor tax in Canada and how it differs by province.
In 1996, the federal government passed the Liquor Tax Act. This act required all Canadian provinces to impose a base liquor tax on retail alcohol sales. Liquor tax is not paid by manufacturers or distributors.
Rather, it’s paid by consumers whenever they purchase liquor from a liquor store or when they purchase liquor from a bar or club.
In addition to taxing straight liquor, liquor “coolers” (such as a canned vodka-soda mix) are also subject to liquor tax, similar to a liquor-based cocktail purchased from a bar.
The Three Types Of Liquor Taxes In Canada
Canada’s Liquor Tax Act meant that all provinces in Canada would have to impose at least some type of additional liquor tax or sales restriction on retail liquor sales. However, the act allowed provinces to decide the amount to be taxed and, more importantly, how the liquor would be taxed.
Some regions, such as the Northwest Territories, don’t have a set tax rate. However, liquor sellers must adhere to strict guidelines when selling liquor, such as setting daily spending limits or only selling certain-sized bottles.
Depending on the province, there are three different ways that liquor (and all alcohol, for that matter) can be taxed in Canada, including:
- Tax percentage rate
- Volumetric liquor tax
- Flat-rate liquor tax
A tax rate percentage is, by far, the most common type of liquor tax in Canada, as it’s the simplest to calculate.
Provinces like New Brunswick, PEI, BC, and Saskatchewan have all implemented a base tax rate that’s charged as a percentage, no matter what type of liquor or liquor-based beverage is being purchased.
Volumetric liquor tax is a lot more complicated for consumers and retailers to calculate. However, some provinces like Ontario and Quebec have implemented it.
As you might be able to tell from the name, a volumetric liquor tax applies separate tax rates depending on the volume of alcohol being purchased. Ontario charges both a standard liquor tax rate and a volumetric tax rate.
Most provinces don’t charge a flat-rate liquor tax. However, this tax is when customers are charged a single flat rate for their purchase. For example, Ontario charges an additional 8.93 cents for non-refillable alcoholic containers (which is most alcoholic containers).
Now that you understand the different types of liquor taxes in Canada let’s take a quick look at the liquor taxes in Canada by province:
|Alberta||$18.33 markup tax per litre (greater than 60% ABV) $13.76 markup tax per litre (between 22% and 60% ABV)|
|British Columbia||10% tax rate on all liquor sales|
|Manitoba||Flat-rate markup between $1.16 and $60.37, depending on volume|
|New Brunswick||5% tax rate on all liquor sales|
|Ontario||61.5% tax rate on liquor sales and 38 cent flat-rate markup on liquor sales (per litre)|
|Prince Edward Island||25% tax rate on liquor sales|
|Quebec||Flat-rate markup of 72 cents per litre of liquor|
|Saskatchewan||10% tax rate on all liquor sales|
|Yukon||12% tax rate on liquor sales|
Here are some insights into this table:
- Diverse Approaches to Taxation: The provinces and territories have various methods of taxing liquor:
- Percentage-based Tax Rate: British Columbia, New Brunswick, Ontario, Prince Edward Island, Saskatchewan, and Yukon tax based on a percentage of the liquor’s price.
- Flat-rate Markup: Manitoba, Quebec, and Ontario have flat-rate markups, where a fixed amount is added per unit (like per litre) regardless of the cost of the liquor.
- Markup Based on Alcohol Content: Alberta’s approach is unique in that it charges based on the alcohol by volume (ABV) content.
- Highest Potential Tax Rate:
- Ontario has the highest percentage-based tax rate at 61.5%. However, it’s essential to note that this doesn’t automatically translate to the highest overall tax due to the 38 cent flat-rate markup on liquor sales. The actual tax would depend on the price of the liquor.
- Complex Tax Structure:
- Alberta has a differentiated tax structure based on the alcohol by volume (ABV) content, with higher taxation for higher ABV liquors.
- Manitoba has a wide range of flat-rate markup, with the actual rate being dependent on volume. It’s the most variable in this list.
- Lowest Flat-rate Markup:
- Quebec charges the lowest flat-rate markup of just 72 cents per litre of liquor. This approach is straightforward and easy to understand, but may not necessarily consider the alcohol content or the price of the liquor.
- Common Percentage Rate:
- A tax rate of 10% on liquor sales is common and is shared by British Columbia, Saskatchewan, and the Yukon.
Why Does Canada Charge Liquor Tax?
Compared to other countries, Canada has some of the highest liquor taxes in the world. Needless to say, many Canadians aren’t happy about this, especially when you consider that some cities (like Vancouver, for instance) are continuing to increase alcohol taxes.
So, why does Canada charge a liquor tax in the first place?
The official justification for high liquor taxes in Canada is to “reduce liquor consumption.” However, many Canadians have referred to Canada’s exorbitant liquor taxes as a blatant tax grab that’s designed to exploit alcohol addicts.
I’ll leave it up to you to decide which. However, the evidence does suggest that higher liquor taxes have significantly reduced liquor consumption. For example, the 10% liquor tax increase in Saskatchewan resulted in 8.4% fewer alcohol sales in the province.
At the end of the day, alcohol is an addictive substance that can cause lots of harm when over-consumed and abused. Chronic alcohol abusers are at far higher risk of heart attacks, stroke, and cancer.
Given that Canada’s universal healthcare program covers the majority of medical costs and hospital visits, alcohol abuse represents a financial strain on the healthcare system.
The idea behind the liquor tax is to discourage the abuse of concentrated liquor by implementing high liquor taxes.
Impact of Liquor Tax on Prices and Consumption
One of the immediate consequences of imposing or increasing a liquor tax is a surge in the retail price of alcoholic beverages. This price hike can significantly modify consumer behaviour.
For occasional drinkers, this could mean cutting back on indulgence or switching to alternatives that offer better value for money. For regular and heavy drinkers, higher prices can either lead to reduced consumption or a shift towards cheaper alcohol variants, which might not always be of the best quality.
This phenomenon is particularly pronounced among young adults and college students, who might already be operating on a limited budget.
Beyond individual consumption, high liquor taxes can also influence social norms. When alcohol becomes more expensive, group outings, parties, or events might see a decline in alcohol consumption. This could inadvertently promote more responsible drinking habits in group settings.
However, it’s worth noting that while the intention behind liquor taxes might be to curb excessive drinking, it could also have unintended consequences. Some consumers might turn to the black market, illicit brews, or homemade alcohol, which can be dangerous due to the lack of quality control.
Liquor Tax and Government Revenue
Revenue generated from liquor taxes can be substantial, even if the tax rate is only increased by a small percentage. This is because alcohol is a widely consumed commodity, and even minor tax adjustments can lead to significant aggregate revenue.
This revenue is often reinvested into public infrastructures like hospitals, roads, schools, and other communal projects. Some governments earmark a portion of these funds specifically for alcohol awareness programs, rehabilitation centers, and other initiatives aimed at combating alcohol abuse and its societal implications.
However, while the revenue aspect is a boon for the government, it also presents a dilemma. If the tax is too high and it curtails alcohol consumption too aggressively, it might actually reduce the revenue generated. This delicate balance means that governments have to tread carefully, ensuring they achieve public health objectives without compromising their revenue stream.
Can I calculate the liquor tax in Canada by province using a calculator?
Yes, you can calculate the liquor tax based on the province using a calculator. However, you’d need to know the specific tax rate or structure for the province in question. For instance, if you’re calculating for a province that uses a percentage-based tax, you’d multiply the cost of the alcohol by the tax rate to get the tax amount.
If it’s a volumetric tax, you’d need to know the tax per volume and multiply it by the quantity of alcohol you’re purchasing. There are also online calculators available that are designed specifically to calculate alcohol tax by province, making the process easier.
Will there be an increase in alcohol tax in Canada?
Predicting future changes in tax rates is challenging as it depends on a range of economic, social, and political factors. Historically, liquor taxes in Canada have seen both increases and occasional decreases.
Several factors could influence an increase: economic challenges, public health goals, inflation, or the need for increased government revenue. Provinces might adjust their rates to account for these factors.
What Makes Liquor Tax In Canada Different From Alcohol Tax?
While liquor prices remain historically high in Canada, the tax rates on less concentrated alcoholic beverages like beer, wine, and malt beverages have intentionally been kept lower. This incentivizes more responsible, healthy consumption of alcohol.
If you’re importing liquor into Canada from across the border, then you’ll also have to pay an additional excise shipping duty fee. The following fees apply:
- Spirits with less than 7% ABV: 33 cents per litre
- Spirits with more than 7% ABV: $13.04 dollars per litre
Of all the provinces in Canada, Ontario has the highest liquor tax rates. In addition to flat-rate fees, Ontario imposes a 61.5% retail sales tax on all liquor purchases.
Liquor taxes have become a standard part of everyday life for most Canadians. There are no signs that indicate a future decrease in taxes either. If anything, more provinces are beginning to increase their liquor taxes to keep up with growing inflation.
From a financial perspective, alcohol can be a real drain on your money, and every dollar spent on exorbitantly taxed liquor is a dollar that you could have invested or saved toward your financial freedom. To learn more about investing, be sure to check out my beginners’ guide to investing in Canada next!