Press Release: Financial Post Recognizes Alberta Beer Tax Rebate is not Constitutionally Complaint

Press Release: Financial Post Recognizes Alberta Beer Tax Rebate is not Constitutionally Complaint

A Financial Post article on September 13, 2016 referred to the Alberta beer tax rebate under the Alberta Small Brewers Development Program as “the most trade and constitutionally compliant in Canada.”

After surveying a number of other provincial brewers’ subsidy programs, and noting that Ontario’s Steam Whistle allegedly receives some $2.5 million annually of taxpayer money from the Ontario government, David Menzies of the Financial Post concluded that the Alberta Small Brewers Development Program may “suck”, but it “sucks less” than other provincial subsidies because it takes the form of a “non-discriminatory uniform tax rate with targeted grants.”

Nothing could be further from the truth.

The Alberta Small Brewers Development Program is discriminatory. In fact, discrimination is its driving motivation and its defining characteristic. The policy provides volume-based rebates to Alberta breweries—and only Alberta breweries—in exactly the amounts that they previously provided discriminatory tax breaks, up to a ceiling that includes virtually all the craft breweries.

That is an unconstitutional tariff in effect, if not in name.


The discriminatory nature of the Alberta Small Brewers Development Program can be seen easily by looking at how the Alberta government arrived at its current policy.

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. The government’s stated intent was to diversify the economy, support local jobs, and support Alberta’s craft brewing industry (which, ironically, was already thriving without this support—doubling in the last two years alone).

Some Canadian brewers, like Montreal’s acclaimed Dieu du Ciel, had the tax on their beer rise from $0.10 to $1.25 per litre overnight, an increase of 525%. Other brewers like Muskoka decided it was no longer economical to sell beer in Alberta under the new scheme and were forced out of the market. Ontario brewery Steam Whistle was forced to go to court to get an injunction against the tariff. Alberta small businesses, like Artisan Ales, who import the best craft brews from across the country so Alberta consumers can have the best choices in Canada, experienced a precipitous drop in sales. Alberta beer drinkers saw prices rise and selection decrease.

In December 2015, the Canadian Constitution Foundation wrote Finance Minister Joe Ceci in informing him that the new protectionist scheme 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. No province is permitted to erect tariff barriers (taxes assessed by volume, weight, etc.) that discriminate against out-of-province goods.

In response, on July 28, 2016, the Government of Alberta announced further changes to its beer tax. Effective August 5, 2016, brewers of all sizes from all provinces would notionally pay the same tax rate. However, Alberta-based brewers will now receive a rebate “based on sales volumes of Alberta-made beer sold in the province.” The rebate, under the name of the “Alberta Small Brewers Development Program”, simply refunds Alberta brewers the difference between the old and new tax rates, up to a ceiling that ensures it applies only to craft breweries.

This revised policy remains unconstitutional and discriminatory as it results in differential effective tax rates on Alberta craft breweries and out-of-province craft breweries. In other words, the province is still imposing a tariff barrier to interprovincial trade.

Other provinces may indeed be imposing similar unconstitutional tariff barriers and many are certainly imposing unconstitutional non-tariff barriers in order to protect their own beer industries. But their unconstitutional policies do not change the unconstitutional nature of the Alberta Small Brewers Development Program. If other such provincial trade barriers exist, those too must be removed so that all provinces are in compliance with Section 121 of the Constitution.

Section 121 of our constitution was intended by the Fathers of Confederation to create a free trade zone within Canada. George Brown said that: “[the] Union of all Provinces would break down all trade barriers between us, and throw open at once… a combined market of four million people.” And Alexander Galt believed that one of “the chief benefits expected to flow from confederation [is] the free interchange of the products of the labor of each province.”

Rather than continuing to repackage its own discriminatory tariff barrier, the Government of Alberta should take its complaints to the other provinces and demand that they eliminate their own unconstitutional policies.

Even better, they should join the Canadian Constitution Foundation’s challenge to New Brunswick’s unconstitutional law against transporting alcohol from another province, R. v. Comeau. After an initial victory in the trial court, that case has now been appealed by the Government of New Brunswick. We would welcome the support of the Government of Alberta as interveners in defense of a level playing field for all provinces, free of tariff and other discriminatory barriers, when it comes to the sale and transport of beer within Canada. If that is truly what the Government of Alberta wants, this is the case that could achieve it.

Canadian Constitution Foundation Lawyer, Derek From, said:

“Section 121 of the Constitution Act, 1867 is clear. Provincial governments cannot erect tariff barriers to interprovincial trade. While Alberta’s new plan applies the same increased mark-up to beer from all provinces, it’s only brewers in Alberta that are indemnified against this new cost. While Alberta is collecting the same amount of tax on all beer regardless of origin, it is then immediately handing back to Alberta brewers the increase in the taxes that it is collecting from them and only from them. Effectively, nothing has changed.

“The Government of Alberta cannot do indirectly what the Constitution clearly says is cannot do directly. The Constitution cannot simply be bypassed by sleight of hand. The new ‘tax and rebate’ program is merely another variety of tariff barrier that is forbidden by our Constitution.”