There was a brief time when Alberta was a craft beer lover’s paradise. An enlightened combination of open borders and low taxes made for the best selection and cheapest prices anywhere in Canada. And with new local craft breweries opening every year, consumers were spoiled for choice from quality local, domestic, and international brews.
Cue the sound of a record needle slipping.
While Alberta still has better-than-average selection (at least for now), a recent series of provincial tax hikes threatens to price many of the best beers from across Canada and around the world out of the market. Fans of Quebec micro-brews and rare Belgian ales should expect to see fewer of them on Alberta shelves as discriminatory treatment of out-of-province beers prices makes them too expensive to import.
How did we get here? Last October, the Government of Alberta announced it would begin taxing beer from small breweries outside the New West Partnership (British Columbia, Alberta, and Saskatchewan) at a significantly higher rate than it would tax similar small breweries located in those provinces. The announced purpose was to insulate Alberta’s craft brewing industry from competition by giving it a financial edge.
Lousy economic theory aside, the new policy was a shock to importers as it came without warning or, apparently, legal analysis.
Shortly after this announcement, the Canadian Constitution Foundation (CCF) wrote to the Minister responsible to explain that the differential tax treatment of beer based on its province of origin was an unconstitutional tariff that violated section 121 of the Constitution Act, 1867.
Section 121 provides that “all articles of the growth, produce or manufacture of any one of the provinces shall … be admitted free into each of the other provinces.” Simple, clear, and apparently news to the Alberta government.
This constitutional guarantee was intended by the Fathers of Confederation to create a free trade zone within Canada and has long been interpreted by the courts as prohibiting provincial tariffs like the one proposed in October.
In the recent case of R. v. Comeau, in which the CCF was proud to support Gerard Comeau, a New Brunswick court affirmed that section 121 also prohibits a province from enacting non-tariff barriers to the free movement of goods from another province — in that case, a fine for buying beer in Quebec and driving it home to New Brunswick. Sir John A. Macdonald must have raised a glass from the beyond at this victory for free interprovincial trade, which he and the other drafters of the Constitution Act, 1867, had intended for their new country.
Even the Government of Alberta had to admit there was no way around Section 121: the October policy was an unconstitutional tariff, in clear violation of longstanding Supreme Court precedent. So they went back to the drawing board and, on Thursday, announced a “new” new tax policy for beer.
Although details remain scant, the “new” new policy will tax beer from all breweries — large and small, whatever the province of origin — at the same higher rate. But, crucially, the government will provide a subsidy to Alberta small breweries to compensate for the tax grab. (Do you get the feeling that the government is making this up as they go?)
According to Thursday’s announcement, the new subsidy program will be “based on sales volumes of Alberta-made beer sold in the province.” We will have to wait to find out exactly how this works but, as described, it sounds like a neutral tax on all craft beers combined with a sales-based refund that discriminates based on the province of origin. A tariff by another name, but hidden behind a layer of bureaucratic complexity to obscure its true nature.
The Government of Alberta cannot do indirectly what it is not permitted to do directly, and a back-door tariff would still fail the constitutional test of Section 121. If the government persists in discriminating against craft beers based on the province in which they are brewed, the CCF is confident that a court will have no problem seeing through this clumsy sleight of hand.
Howard Anglin is the Executive Director of the Canadian Constitution Foundation.
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