Decision: Alberta’s discriminatory beer tax violates Agreement on Internal Trade

Decision: Alberta’s discriminatory beer tax violates Agreement on Internal Trade

Today, an expert panel convened pursuant to the dispute resolution process of the Agreement on Internal Trade (AIT) ruled that the Government of Alberta’s Small Brewers Development Program, which discriminates against out-of-province craft beers, does not comply with the province’s free trade obligations under Canada’s Agreement on Internal Trade. The challenge is a huge victory for Artisan Ales, a Calgary owned-and-operated small business, whose business was devastated by the discriminatory policy designed to restrict access to the quality craft beers it imports from other provinces.

A majority of the panel agreed with both Artisan Ales and with the Province of Saskatchewan, who joined them in disputing the policy, that the 2016 tax-and-refund scheme “clearly discriminates[s] against the beer products of non-Alberta breweries in the sale of those products within Alberta.”

The panel’s decision can be found here.


On October 27, 2015, the Government of Alberta announced that it would tax beer from small brewers outside the New West Partnership (British Columbia, Alberta, and Saskatchewan) at a significantly higher rate than similar brewers located within those provinces.

This protectionist tax grab clearly violated section 121 of the Constitution Act, 1867, the Constitution’s so-called “free trade” clause and long-established case law from the Supreme Court of Canada that no province can erect tariff barriers to interprovincial trade. It also violated Alberta’s obligations under the AIT, a pan-Canadian free trade agreement.

Artisan Ales, which supplies Alberta with high-quality beers from other Canadian provinces, was badly hurt by this unconstitutional tax. For the 12-month period following the new policy, Artisan Ales’s sales decreased by 33 per cent compared to the previous 12-month period. In dollar terms, for the fiscal year ending on November 30, 2016, Artisan Ales’s sales fell by 32 per cent compared to the previous year, while its net profits fell by 86 per cent.

In December 2015, the Canadian Constitution Foundation wrote to the Government of Alberta, pointing out the policy’s obvious unconstitutionality.

On July 28, 2016, the Government of Alberta announced a superficial tweak to its beer tax policy. Effective August 5, 2016, beers from craft brewers from all provinces would notionally be taxed at the same high rate. However, Alberta-based brewers would now receive a rebate called the Alberta Small Brewers Development Program “based on sales volumes of Alberta-made beer sold in the province.” So, instead of the old policy of taxing out-of-province craft beers at a higher rate than Alberta craft beer, the new policy would henceforth tax all craft-beers at the same high rate, but then refund only Alberta craft brewers the difference.

The revised 2016 policy remained unconstitutional as it simply did indirectly what the province was not allowed to do directly. The practical result was the same differential tax treatment between Alberta breweries and out-of-province breweries. As the revised policy remained discriminatory against the out-of-province beers Artisan Ales imports, its sales continued to decline.

The Agreement on Internal Trade

The AIT provided Artisan Ales with an additional avenue to enforce the spirit of the constitutional guarantee of section 121 of the Constitution Act, 1867; and as today’s decision shows, the panel of trade experts agreed with Artisan Ales’s submissions that the Alberta’s Small Brewers Development Program also violates the AIT.

The AIT is a free-trade agreement between all Canadian provinces and the federal government, which was signed in 1994. Under the AIT, the Government of Alberta is committed to “reciprocal non-discrimination”—meaning that Alberta must treat beer produced in any other province no less favourably than how it treats beer produced within Alberta. Although the AIT was superseded earlier this year by the Canadian Free Trade Agreement, the governing principles remain broadly the same and Artisan Ales’s complaint was grandfathered in from the earlier agreement.

Artisan Ales owner, Mike Tessier said:
“The Government of Alberta has devastated my business. For the fiscal year ending in November 30, 2016, sales decreased by over 33 per cent relative to the previous year, and net profits decreased by 86 per cent. Today’s announcement is a huge victory not only for my business, but for all craft beer drinkers in Alberta. This decision could again make ours the best beer market in Canada.”
Derek From, Staff Lawyer for the CCF, said:
“Hopefully this time the Government of Alberta gets the message: new taxes that discriminate against out-of-province craft beer not only hurt consumers by reducing selection and driving up the price of popular products, they violate the free-trade principles enshrined in our constitution and reflected in the Agreement on Internal Trade. Alberta should lower its beer tax back to pre-2015 levels so that we can once again become the best place in the country to brew, buy, and drink craft beer.”
The Canadian Constitution Foundation (“Freedom’s Defence Team”) is a registered charity, independent and non-partisan, whose mission is to defend the constitutional freedoms of Canadians through education, communication and litigation.