Beer tax hikes push Ontario's Muskoka Brewery out of Alberta

Ontario -based Muskoka Brewery is the latest microbrewery unhappy with new beer taxes in Alberta, saying it will pull its beer from provincial shelves.

The government announced an increase of five per cent, or about 21 cents for a case of beer in its recent budget.

But for small producers outside of Alberta, B.C. or Saskatchewan like Muskoka, that hike combined with revisions to graduated tax rates for small craft brewers can mean significant increases. 

Under the previous regime, Muskoka paid a tax rate of 40 cents per litre based on its production; it now faces a rate of $1.25 per litre, or an increase of 212.5 per cent.

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"Up until this new legislation was announced, we had no intention of leaving," wrote Garry Mullen, the president and founder of the brewery, in a news release. 

"In fact, we had plans to widen our footprint based on the growing demand for our beers. We're sorry to leave our friends and supporters, but with this new tax increase, it's now unsustainable to sell our beer in these provinces." 

Muskoka joins Scotland's Innis & Gunn and Toronto's Steam Whistle in condemning the new tax hike. The other two breweries have not threatened to stop shipping to Alberta. 

Changes celebrated by Alberta breweries

The tax increases, which only apply to producers outside Alberta, B.C. and Saskatchewan and those producing over 200,000 hectolitres, have been celebrated by local microbreweries, which have long argued that Alberta's tax regime gives outsiders an advantage.

In essence, the Alberta brewers argued they were not given tax breaks in other jurisdictions, while those from outside Alberta selling within the province were getting the Alberta advantages plus benefits from their home turf. 

It was argued this was preventing more microbreweries from opening in Alberta, which has few small producers compared with other locales. 

Small breweries in Saskatchewan and B.C. will continue to benefit from reduced rates thanks to the New West Partnership, a free trade area of sorts between the three western provinces. There is no reciprocal benefit for Alberta breweries in those provinces. 

Fighting the changes

Muskoka says it will continue to fight the increases. 

"We are fully committed to continuing to grow the true Canadian craft beer industry, and we will work closely with like-minded craft brewers to get these protectionist measures rolled back," wrote McMullen. "We can't allow this setback to divide the Canadian craft brewing community." 

Other recent changes to Alberta's brewing regulations include allowing brew pubs to sell their beer outside of the pub, and the lifting of rules that required breweries to have a minimum brewing capacity of 500,000 litres.

That last change led to the creation of several new operations in Alberta, including Calgary's Tool Shed Brewing.