Canada's federal government is capping the duty on alcohol at 2% for two additional years following its introduction last year.

Ottawa taxes alcohol products in line with the country’s consumer price index (CPI).

Last year, the government placed a temporary cap on the inflation adjustment for excise duties on beer, spirits, and wine as they were set for a rise of around 5%. That 2% cap will now be extended to 1 April 2026.

The current (2024-25) excise duties on Canada-produced alcohol are: C$37.19 per hectolitre of beer that contains 2.5% alcohol or more; for spirits, C$13.9 per litre of absolute ethyl alcohol; and C$0.7 per litre of wine. Alcohol products below 0.5 abv are not charged excise duty.

National trade association Spirits Canada welcomed the move and noted the mechanism to raise taxes following the country’s CPI was brought into effect in 2017 when inflation levels were between 1% to 1.5%. 

“This pause creates a stable outlook that consumers, business owners, and the government itself can rely on to plan for Canada’s long-term fiscal stability,” Spirits Canada CEO Cal Bricker said.

Canada’s government is also cutting the excise duty rate in half for the first 15,000 hectolitres of beer brewed. The government estimates the move will give smaller brewers an average tax relief of C$86,952 ($64,495) in the year ending 1 April 2025.

These proposals are set to be introduced in Canada’s next budget on 16 April.

The Canadian Craft Brewers Association and Coalition of Canadian Independent Craft Brewers praised both moves but said there is more to do to support larger independent brewers.

“We applaud the federal government’s recent announcement but recognise there is still more work to be done to modernise the excise tax schedule to support the larger independent craft brewers,” Brad Goddard, the chair of the Coalition of Canadian Independent Craft Brewers, said.

“More than 60% of the country’s craft beer production comes from breweries over 15,000 hectolitres and with further excise tax reductions for these independent breweries they will also be able to significantly contribute to an increase in jobs, beer production, and tourism across Canada.”

Canadian Craft Brewers called for the government to halve the excise duty rate for the first 500,000 hectolitres produced. The trade body claims that, in 2023 alone, 70 breweries shut down in Canada.

Earlier this month, the UK government extended its freeze on alcohol duty by six months to early 2025.