Canada’s federal government has capped the rise in excise tax on beverage alcohol products.

In its budget, Ottawa has issued a short-term limit on the inflationary adjustment planned for the tax.

Canada’s federal alcohol escalator tax automatically increases excise taxes on beer, wine and spirits every year by the rate of inflation. It was set to increase by 6.3% on 1 April.

“This proposal temporarily caps the inflation adjustment for excise duties on all alcoholic products at 2% for one year only as of April 1, 2023,” the budget stated.

As expected, the move was welcomed by the beverage-alcohol sector.

Beer Canada, the trade body for the country’s brewing industry, said an increase of 6.3% would have been the largest beer tax hike imposed on Canadians in 40 years.

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CJ Hélie, the president of Beer Canada, said the budget had “responded to today’s unique business circumstances, a struggling hospitality sector and a fragile consumer”.

A similar sentiment emerged from the country’s wine sector. “Wine Growers Canada applauds the government for their commitment to the Canadian wine industry by placing a maximum inflationary cap on the annual indexation of Canada’s excise duty rates on wine,” Dan Paszkowski, the president and CEO of Wine Growers Canada, said.

Jan Westcott, the president and CEO of distillers’ trade association Spirits Canada, said “a two-year reprieve would have been ideal” but added: “We do appreciate the government’s decision to cap the excise increase at 2%. Canadians already pay some of the highest alcohol taxes in the world, but this gesture of support for consumers and for our struggling hospitality sector will help minimize the resulting price increases. Considering the record high inflation, capping the escalator increase is a step in the right direction.”

Canada’s federal budget also included the removal of federal alcohol excise duties levied on non-alcoholic beer.