Trade barriers, high taxes leave consumers crying in their beer

With the Alberta and Saskatchewan governments at odds over beer policy, it’s unfortunate that neither side in this battle has the best interests of consumers at heart.

This beer war was sparked by the Notley government’s decision earlier this month to hike Alberta’s beer markup rate across the board to $1.25 for each litre sold. In doing so, the government eliminated the more favourable rate enjoyed by smaller Alberta breweries — a courtesy that had also been extended to breweries in Saskatchewan and B.C.

Rather than defend a preferential taxation policy that punishes other provinces, the government has opted for a single tax rate and will instead offer subsidies to smaller breweries in Alberta. However, we still don’t know how that is going to work. For some mysterious reason the government opted to announce only half of the policy, with the rest to come later.

The Saskatchewan government reacted angrily to the announcement, calling it “offside” with the New West Partnership trade agreement. Don McMorris, the minister responsible for the Saskatchewan Liquor and Gaming Authority (SLGA), suggested that his province might have to review its own policies, including the markup charged on Alberta beers.

Late last week Saskatchewan Premier Brad Wall and Rachel Notley met face-to-face to discuss the matter, but it’s unclear whether they came to any kind of agreement or consensus.

The result, it still seems, will be consumers in both provinces paying more for beer. Both sides have much to answer for.

As far as Saskatchewan is concerned, it’s really in no position to be lecturing Alberta about protectionist policies or high tax rates. Other than for the smallest microbreweries, Saskatchewan’s markup rates are all higher than Alberta’s new single rate — up to a top rate of $1.99 a litre. Additionally, Saskatchewan has something called a “Liquor Consumption Tax,” which is a 10 per cent tax on the total selling price.

Furthermore, while any beer can be listed in Alberta’s open market after filling out the requisite paperwork, Alberta breweries have found it rather difficult to crack the Saskatchewan market, where the SLGA still controls which beers end up on the shelves.

None of that, though, should let the Notley government off the hook here at home. While the government is ostensibly trying to help small breweries get a foothold in the marketplace, it’s simultaneously punishing consumption through higher sin taxes. Whatever laudable goals the NDP touts about helping local business, the goal still appears to be finding new revenue.

That, regrettably, is nothing new in Alberta. The last PC budget hiked the markup rates, and the NDP had already increased the top rate to $1.20 a litre before this latest change.

So why $1.25 as the new acrossthe-board rate? Why not go back to the previous rate of 1.20 or go back even further and undo some of the Tory rate increases? By comparison, B.C.’s top rate is only $1.08 a litre.

Much like their approach in other sectors, though, it seems the NDP approach to small breweries in Alberta is not to get out of the way, but rather to make them more dependent on government. But what is the market failure that justifies subsidies and how will we know when they’re no longer needed?

It’s not clear that we even needed all this tinkering. Previously announced rule changes in Alberta, such as the elimination of the minimum capacity requirements and other restrictions on establishing brew pubs, seemed to have sparked a boom in craft brewing. Have we really allowed those changes to have their full impact?

Alberta has some amazing craft brewers and brew pubs, and it’s certainly worth knowing and understanding how the success stories have arisen and what barriers to success still remain — both in terms of the Alberta market and the broader Canadian market.

However, the consumer shouldn’t be forgotten here. Trade barriers and high taxes restrict choice and inflate prices, and yet neither the Alberta nor Saskatchewan governments seem particularly concerned about addressing this.