Canada’s restaurant industry is bracing for the biggest jump in the country’s alcohol excise duty in more than 40 years, spurring warnings the tax hike could force some bars and restaurants out of business.
Business
Restaurants and bars across Canada brace for biggest alcohol tax jump in 40 years
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Bar and eatery operators across Canada have endured lockdowns, labour shortages, supply chain mayhem and soaring costs for everything from payroll to cooking oil. Rising inflation has also softened demand as some consumers stay home to save money.
“Many of us haven’t recovered from the pandemic and now they want to raise this tax,” she said. “It’s hard to get blood out of a turnip. We’ll see more restaurant closures if this goes ahead.”
The federal beverage alcohol duty is set to increase 6.3 per cent on April 1.
While the duty is separate from provincial liquor board fees and sales taxes, it ultimately filters down to higher prices for consumers, said CJ Helie, the president of Beer Canada.
“It’s imposed at the point of production and paid by the manufacturer, which means it’s built into the price of the product and magnified as it goes through the supply chain from the distributor to the retailer,” he said.
The automatic annual tax increase is a long-standing irritant for the beverage industry, but was “digestible” when inflation was around two per cent, Helie said.
But this year’s adjustment is more than triple the usual increase and should be reconsidered given the state of the industry, he said.
Some brewers may try to absorb the higher cost by delaying investment plans like new hiring but he said there’s only so much they can do before passing the tax hike along.
“They’ll try to recoup what they can through the wholesale price but it could impact demand and end up costing them in lower sales volumes anyway,” Helie said.
Alcohol excise duty rates are adjusted by law on an annual basis to account for inflation, Adrienne Vaupshas, press secretary of Finance Minister Chrystia Freeland, said in an email.
The increase next month works out to less than a penny on a can of beer, she added.
But industry group Restaurants Canada said it will cost Canada’s food-service industry about $750 million a year, with the average casual dining restaurant expected to pay an extra $30,000 towards alcohol.
At the retail level, the impact may be more subtle. Though added on top of other price increases, consumers may notice higher prices.
The Liquor Control Board of Ontario said customers may experience a price increase on select products by the end of April if manufacturers pass along the federal excise tax increase.
A spokeswoman for the Nova Scotia Liquor Corp. said beverage alcohol prices are increasing by just over three per cent overall next month.
But these increases are due to a number of factors, including higher excise taxes and the rising cost of raw goods such as bottles, cans, barley, and labels, NSLC spokeswoman Allison Himmelman said in an email.
In British Columbia, a spokesperson for the BC Liquor Distribution Branch said it’s not possible to confirm what level of price increase consumers may or may not see.
“Each liquor supplier will decide whether or not to increase its wholesale price to account for the increase it must pay in excise duty,” Robin Fraser said in an email.
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“Then retailers will make the decision on whether to adjust the prices for consumers for those products,” Fraser said. “It is up to each retailer to determine if, and by how much, to raise its prices.”
Alcohol beverage prices rose 5.7 per cent in February compared with a year before, according to Statistics Canada.
While that’s only slightly higher than the overall inflation rate of 5.2 per cent last month, the tax hike in April along with other increases could see the alcohol inflation rate rise faster than general inflation later this spring.
“Our industry is struggling and we can’t absorb more increases,” said Olivier Bourbeau, vice-president of federal affairs with Restaurants Canada. “Restaurant margins are always thin but right now they’re around two to three per cent.”
This is in part because restaurants are absorbing some of the higher costs due to inflation, Bourbeau said.
Indeed, while grocery prices recorded a 10.6 per cent year-over-year increase in February, restaurant food prices only rose 7.7 per cent, Statistics Canada figures show.
Also, alcohol beverages purchased from stores rose 6.0 per cent in February, while alcoholic beverages served in licensed establishments increased only 4.3 per cent, the agency said.
“Restaurants can’t absorb any more price increases,” Bourbeau said. “But if they pass those costs to customers it could hurt their business.”
“At the end of the day, consumers will only pay so much before they start to cut back.”
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In an effort to address economic disparities and promote entrepreneurship among Black communities, Canada introduced the Federal Black Entrepreneurship Program (FBEP) and the associated Black Entrepreneurship Loan Fund (BEFL). However, recent revelations have brought to light a shocking reality: the underutilization and obstacles faced by Black businesses in accessing the FACE (Funding for Black Entrepreneurship) loans. In this thought-provoking article, we delve into the numbers and uncover the challenges and experiences of Black entrepreneurs in navigating these loan programs. Through interviews with business owners, experts, and advocates, we shed light on the systemic barriers that hinder their success and explore potential solutions for a more equitable and inclusive lending landscape.
The FACE loan program was created with the intention of providing financial support and resources to Black-owned businesses. However, the reality has been far from the expected outcomes. Jessica Thompson, an economist specializing in racial disparities, states, “The FACE loan program was designed to address historical economic disadvantages, but the numbers reveal a significant gap between its objectives and the lived experiences of Black entrepreneurs.”
Black entrepreneurs face numerous hurdles when attempting to access FACE loans. A lack of awareness about the program, complex application processes, and limited outreach to communities in need contribute to low participation rates. Michael Johnson, a business owner, shares his frustration, saying, “It’s disheartening to see a program that was meant to uplift Black businesses fall short due to bureaucratic obstacles. Many of us struggle to navigate the application process and meet the stringent criteria.”
Systemic barriers and discrimination persist within the lending landscape, perpetuating the cycle of inequality. Dr. Maya Williams, a sociologist specializing in racial disparities, explains, “Structural racism and bias continue to disadvantage Black entrepreneurs. Discrimination in loan approvals, higher interest rates, and limited access to capital contribute to the challenges faced by Black-owned businesses.”
The consequences of the FACE loan program’s shortcomings are far-reaching. Many Black-owned businesses struggle to access the capital needed for growth, expansion, and operational sustainability. Tanya Campbell, a business owner, emphasizes, “The lack of financial support hampers our ability to scale our businesses, hire employees, and contribute to the local economy. It perpetuates a cycle of limited opportunities and restricted growth.”
To address the disparities within the FACE loan program, experts and advocates propose several solutions. Improved outreach and community engagement, simplified application processes and tailored support services can increase access and awareness among Black entrepreneurs. John Stevens, a business consultant, suggests, “The government must invest in targeted initiatives that address the specific needs and challenges faced by Black-owned businesses, such as mentorship programs, financial literacy training, and capacity-building initiatives.”
Addressing the challenges faced by Black entrepreneurs requires collaboration and accountability from various stakeholders. Governments, financial institutions, and community organizations must work together to create an inclusive lending ecosystem. Mary Johnson, an advocate for Black economic empowerment, states, “Transparency, accountability, and ongoing dialogue between policymakers, lenders, and Black entrepreneurs are essential to drive meaningful change and ensure equal opportunities for all.”
The FACE loan program aimed to empower Black entrepreneurs and address economic disparities, but the reality falls short of expectations. The underutilization and obstacles faced by Black businesses in accessing FACE loans highlight the pressing need for systemic change within the lending landscape. By acknowledging and addressing the structural barriers, streamlining processes, and fostering collaboration, we can create a more inclusive and equitable environment where Black entrepreneurs thrive. It is through proactive measures, collective effort, and ongoing dialogue that we can dismantle systemic inequities and build a future where Black-owned businesses have equal access to the resources and support necessary for success.
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Crude oil began trading this week with a gain after President Biden and House Speaker Kevin McCarthy were reported to have reached a provisional agreement on raising the debt ceiling.
At the time of writing, Brent crude was trading at over $77 per barrel and West Texas Intermediate was changing hands at over $73 per barrel.
Debt ceiling negotiations have been a major factor for oil price movements in the past couple of weeks, mostly because of the apparent inability of Republicans and Democrats in Congress to strike any semblance of an agreement on how to increase the federal government’s borrowing power.
According to early reports on the tentative deal, it involves flat spending over the next two years and the recycling of unused Covid funds.
Although such tense negotiations have been relatively regular in past years, they have eventually ended with an agreement, and default has invariably been avoided.
This historical evidence could have served to stabilize prices but it did not, and neither did mixed data about China’s recovery. On the one hand, PMI readings are showing an uneven rebound in economic activity, but on the other, demand for oil as evidenced by import rates, is going strong.
To complicate the picture further, OPEC+ is reportedly in two minds about what to do with its output at its next meeting.
According to reports quoting Saudi Energy Minister Abdulaziz bin Salman, he has hinted at another round of output cuts.
According to reports quoting Russia’s Deputy Prime Minister and top OPEC+ official Alexander Novak, the co-leader of the extended cartel is fine with production where it is right now.
Thanks to its recent gains, oil’s decline since the start of the year has shrunk from about 14% earlier this month to just 9% as of the start of this week, according to Bloomberg.
By Irina Slav for Oilprice.com
Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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American equity futures posted modest gains amid cautious optimism the U.S. will avert a catastrophic default after the weekend’s tentative debt-ceiling deal. European stocks wavered in muted holiday-affected trading.
Contracts on the S&P 500 climbed about 0.2 per cent, while those on the Nasdaq 100 were up around 0.3 per cent, with trading set to end early for Memorial Day. The dollar, which has benefited from angst around the statutory borrowing limit, held Friday’s decline while Treasury futures were flat in the absence of cash trading.
The Stoxx Europe 600 index edged lower, with Spain’s benchmark underperforming after Prime Minister Pedro Sanchez called a surprise snap election following heavy losses for his party in regional and local elections Sunday. Volumes were about 60 per cent lower than usual as markets in the U.K. and some European countries remained closed for national holidays. SBB gained after the embattled Swedish landlord said it may look to sell the company. A gauge of Asia-Pacific equities rose, though Chinese shares slid closer to a bear market.
President Joe Biden and House Speaker Kevin McCarthy expressed confidence that their agreement to curtail spending and extend the borrowing limit will pass through Congress. But even assuming lawmakers seal the deal before the U.S. government runs out of cash in about a week, traders still have much to contend with — from the prospect of another interest-rate hike from the Federal Reserve to a likely deluge of bond issuance from the U.S. Treasury Department.
“The obvious positive interpretation is that a negative tail risk is close to being taken off the table,” said Dan Suzuki, deputy chief investment officer at Richard Bernstein Advisors. “With the distraction of the debt ceiling fading into the background, investors can now refocus their attention on the underlying fundamentals. One concern, though, is that the fundamental picture remains precarious.”
European bonds rose, with Germany’s 10-year yield falling about 11 basis points. Spain’s 10-year yield dropped by a similar amount.
Meanwhile, Turkey’s lira weakened after Recep Tayyip Erdogan won a presidential runoff election on Sunday, extending his time as the nation’s longest-serving leader and leaving investors looking for any signs he’ll start to relax the state’s tight grip over markets. The nation’s stocks benchmark gained.
Gold was flat on waning demand for havens, while as oil held onto most of Friday’s gains and Bitcoin climbed, reflecting a modestly buoyant tone.
‘UNCERTAINTY PERSISTS
The agreement struck by Biden and McCarthy is running against the clock given that June 5 is the date when Treasury Secretary Janet Yellen has said cash will run out. There is plenty in the deal that Democrats and Republicans won’t like.
“Uncertainty persists regarding the duration and severity of the ongoing earnings recession, and perversely, the near-term tightening of liquidity may worsen due to the government’s need to address its debt issuance backlog,” said Suzuki. “While the markets managed to avert an immediate crisis, the coast is far from all-clear just yet.”
The rate-sensitive two-year Treasury drifted Friday as traders considered how a debt agreement could play into the Fed’s path forward on interest rates. The two-year yield hovered around 4.65 per cent after a report on consumer spending showed the Fed still has more work to do to bring inflation back toward its target.
“Markets will have the liquidity hassles to deal with, as the Treasury will issue a deluge of bonds to restore its cash reserves,” said Charu Chanana, market strategist at Saxo Capital Markets. “Not to forget, the hawkish re-pricing of the Fed path that we have seen last week could possibly get firmer if we get a hot jobs print this week.”
Key events this week:
- U.S. Memorial Day holiday. U.K., Switzerland and some Nordic markets also closed for holidays, Monday
- Eurozone economic confidence, consumer confidence, Tuesday
- U.S. consumer confidence, Tuesday
- Richmond Fed President Thomas Barkin interviewed by NABE as part of monetary policy webinar series, Tuesday
- China manufacturing PMI, non-manufacturing PMI, Wednesday
- U.S. job openings, Wednesday
- Fed issues Beige Book economic survey, Wednesday
- Philadelphia Fed President Patrick Harker has fireside chat on the global macro-economy and monetary conditions, Wednesday
- Boston Fed President Susan Collins and Fed Governor Michelle Bowman speak in Boston, Wednesday.
- ECB issues financial stability review, Wednesday
- China Caixin manufacturing PMI, Thursday
- Eurozone HCOB Eurozone Manufacturing PMI, CPI, unemployment, Thursday
- U.S. construction spending, initial jobless claims, ISM Manufacturing, light vehicle sales, Thursday
- ECB issues report its May 3-4 monetary policy meeting. ECB President Christine Lagarde speaks at German savings banks conference, Thursday
- Philadelphia Fed President Patrick Harker speaks on economic outlook at NABE’s webinar, Thursday
- U.S. unemployment, nonfarm payrolls, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.2 per cent as of 9:56 a.m. New York time
- Futures on the Nasdaq 100 rose 0.3 per cent
- The Stoxx Europe 600 fell 0.2 per cent
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro fell 0.1 per cent to US$1.0709
- The British pound was unchanged at $1.2344
- The Japanese yen rose 0.3 per cent to 140.22 per dollar
Cryptocurrencies
- Bitcoin rose 1.3 per cent to $27,919.46
- Ether rose 2.5 per cent to $1,901.1
Bonds
- Germany’s 10-year yield declined 11 basis points to 2.43 per cent
Commodities
- West Texas Intermediate crude fell 0.3 per cent to $72.43 a barrel
- Gold futures were little changed
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