One of the oddest things for a Canadian to read about in that great beery conversation is the role of taxation. You would think that this would be a hot item if the Brewer's Association of Canada is correct when it makes this statement:
Canada, with an average tax rate of 50% on beer, is the second highest taxed country in the world. The combination of municipal, provincial/territorial and federal taxes draw $4.3 billion annually from the brewing industry and its consumers. These tax dollars are used to support government investment in core infrastructure such as hospitals, schools and roads.
But it really isn't any source of heat, no cause for public outrage. We pay what we are asked to pay largely without a peep about how much of it goes into public services. With that reality facing beer drinkers here, it is a bit odd to read the arguments that swirl around beer pricing in the UK as in this article. There seem to be so many contrary and complex policy issues at play in the UK that frankly don't cause a ripple in our society. If a beer were brewed at 4.8% as opposed to 5% no one would really care even though that is the same as the new narrowed cereal boxes foisted upon us in the grocery aisle. I suppose we'd love a price that was only 1/3 taxation as in Britain but, as the liquor stores are pretty much all state owned and/or supplied, as far as I can tell the difference between sales tax, excise tax, retail markup and wholesale markup means little to most beer buyers.
Are we so bamboozled by the system that the difficulty understanding the constituent elements of price has made us docile? Or, as the Brewer's Association implies in the last sentence quoted above, are we so satisfied that the various forms of markup all go to the good that it is not an issue? Just an alternative to direct taxation that at least comes with a buzz?
Comments
Jeff Alworth - March 18, 2012 10:29 PM
I think the type of distribution network you have and who pays the tax have something to do with this. How is beer taxed in Canada?
Alan - March 19, 2012 8:19 AM
The provincial governments own (the LCBO) or regulate (the Beer Store) the distribution system. In Ontario, large breweries own and sell directly to the Beer Store and sells macro gak / licensed products which creates the controlled market. Imported beers have agency representatives who sell directly to the LCBO. Without the wholesale level in the same sense as the US, taxation is more direct and adds up to more than 50% of price.
Jeff Alworth - March 19, 2012 1:18 PM
I think the reason taxes are such a big deal here is because they are assessed on the brewer, who in the three-tiered chain of beer sales, has the least flexibility over pricing. "Beer" is not taxed in the US--breweries are. Nevertheless, everyone always reports, "the increased tax would raise the price of a pint by [insert some absurdly low figure]." And of course everyone then thinks breweries are greedy and evil, because, why else would they complain. Never mind that they may have to eat the tax themselves, or the lion's share, while distributors and retailers get off unbruised.
(For what it's worth, as a communist, I don't hate taxes. If we believe in the pigouvian method of taxing those entities that cost the state money in order to recoup them--on cops, rescue crew, hospital bills--then fine. But the way the US taxes beer is to place the burden largely on the producer, and it's a little harder to see what's pigouvian about that.)
Britain has an entirely different tax structure, with entirely different problems, but I'll leave it to someone slightly more knowledgeable to argue the point.
Alan - March 19, 2012 1:57 PM
You are describing a third way. We Canucks are communalists if not socialists at heart so the lack of backlash here I think is more cultural than economic. The UK discourse seems much more fractured than with that in the US or Canada.
Curmudgeon - March 20, 2012 6:33 AM
Much of the problem with taxation lies not so much in the absolute level of tax, but in rapid increases in the level of tax, which can have a disruptive effect on markets. If tax has always been high, you become inured to it.
As a matter of interest, how much does beer ("decent" but widely available) typically cost in Canada in bars and liquor stores. And, as another comparison with the UK, how much does a litre of gasoline cost?
Alan - March 20, 2012 8:19 AM
A litre of gas right now is hovering between $1.20 and $1.30 and, at this place, there is a two pint special for 11 bucks while, with tip and tax, I can expect normally to pay 7 to ten bucks for 20 oz of good beer. At this place a 12 oz Bud is 4 bucks on a special. Add tax and tip and you are over 5 bucks.
Curmudgeon - March 20, 2012 9:30 AM
Current exchange rate is £1=$1.57 (roughly). So the $1.30 litre of gas is 82.8p, whereas the typical UK price is more like £1.38 at present. However the $7 pint is £4.46, whereas in the UK you would be unlikely to be charged more than £3.50 for a pint of 5% ABV cask beer. At those prices, going to a bar must be a bit of a luxury.
What about off-trade prices?
Alan - March 20, 2012 10:57 AM
Sorry. I was in a rush this morning and forgot the exchange. Thanks for adding it.
Going to a bar is a bit of a luxury. We are a drink at home culture for the most part. You can buy a 500 ml can of Ontario craft beer for about $2.50 to 3.00. I pop over the border for US craft for about the same. But higher end stuff can get over 12 to 14 bucks a 750 ml. Even more for US sourced purchases of gueuze. I bought a 500 ml of California craft last month that I only realized later cost me $22 USD! Shame on me.