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The export of spirits such as whiskey, vodka, rum, gin and tequila is an important source of income for Canada. In comparison to 2016, the past year saw a fall in Canadian spirits exports by a whopping 5.1%. Taking into consideration that spirits account for a larger percent of export than beer, cider and wine combined is cause for concern, especially when we are talking about millions of dollars.
So what caused the drop in exports, if not the aftermath of an over-indulgent holiday season? Well, back in March 2017, the Canadian Federal Government proposed a budget which saw an increase of between 2 and 7.8% in liquor excise duties.
Excise duties, also known as sin tax, are charged immediately after manufacturing, rather than following the sale of a good. They are commonly charged on goods and services deemed undesirable or harmful to society. For example, alcohol, tobacco, and gasoline are just a few common goods that are subject to excise duties.
Being that manufacturers and brand owners have to pay excise duties before receiving any source of profit from their good, a hike in percentages is likely to discourage production. And as we’ve seen with the 5.1% decrease in exports, the proof is there.
At the same time as the Canadian government proposed an increase in sin tax, the United States decided to cut their spirits excise duties, posing some serious competition up North.