Budget 2017

The impact of Budget 2017 on foodservice

Foodservice industry should expect changes, both good and bad, with new federal budget

By Kavita Sabharwal

With the tabling of Budget 2017 comes some changes for the foodservice industry. Although the government plans to increase tourism funding and is putting into place rules to make trade less costly across provincial lines, some other changes to the federal budget will negatively impact the foodservice industry.

The government plans to increase excise duty rates on alcohol products by two per cent, effective the day after Budget Day 2017, but that rate will increase annually along with the Consumer Price Index. The plan was laid out in Budget 2017’s section on Tax Fairness for the Middle Class.

The federal government says excise levies are imposed, in part, for health reasons. The government says that since excise levies have not effectively changed since the mid-1980s as prices rose, they have represented a smaller proportion of the total price of alcohol products, reducing how effective they are. The budget states this increase will maintain their effectiveness.

Although excise levies are imposed at the time of production or importation and are paid by the manufacturer or importer, this news will impact the bar and restaurant industry, as well. The increase will add to the cost of alcohol, ranging from less than a penny for a bottle of wine to an increase of five cents for a 24-case of beer and seven cents for a 750 ml bottle of spirits.

According to CTV News, although the increase is small, it will add up once stores calculate additional sales tax and other duties on top of the base cost of the alcohol product. The government expects to collect an additional $470 million from these levies over the next five years, all of which will come out of the pockets of consumers and licensees. The levies may also lead to the closing of plants and layoffs, according to Spirits Canada.

On a more positive note, Budget 2017 proposes an investment of up to $149.3 million over five years, starting in 2017-18, to renew core food safety inspection programming delivered by the Canadian Food Inspection Agency (CFIA) and Health Canada. The proposed investment would support inspection activities in meat processing facilities, support targeted programming to address the risks associated with listeria contamination, and allow for the ongoing operation of the CFIA’s Inspection Verification Office.

The government is also hoping to further enhance the food safety system with stronger and more consistent food safety regulations under the proposed Safe Food for Canadians Regulations. Once in place, these regulations would consolidate and streamline requirements from various existing legislation and introduce outcome-based approaches to food safety requirements, where possible.

The government also hopes to attract more international visitors to Canada by making permanent the $37.5 million per year in temporary funding previously provided to Destination Canada, the country’s national tourism marketing organization, starting in 2018-19. The government also proposed an additional $8.6 million, provided over four years beginning in 2017-18, to Indigenous and Northern Affairs Canada to support the development of the country’s unique Indigenous tourism industry.

In terms of trade, the federal, provincial and territorial governments have worked together to negotiate a new Canadian Free Trade Agreement (CFTA), which aims to increase choice and lower costs for consumers and create jobs in a range of sectors. It also establishes a process for future trade liberalization in areas including interprovincial trade in alcoholic beverages. The CFTA is expected to come into force this year.

Although the changes to trade, tourism and food safety are positive for foodservice, an industry that is projected to see stalled growth this year, Budget 2017 is posed to negatively impact one of the industry’s most profitable offerings: alcohol.

Kavita Sabharwal is the editor of RestoBiz.ca.

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