HST To Cause Booze Cost Boost

As we reported on the Synergy Merchant Services Blog back in December, Harmonized Sales Tax is set to take effect in both Ontario and British Columbia on the first of July this year. Now, under two months away from HST becoming the norm in both provinces, citizens are growing more agitated as they await the impending increase of everyday costs.

Interestingly, one of the few items that would be decreasing in price due to HST – alcohol – will be going up! As Queen’s Park Bureau Chief, Robert Benzie reports today in The Toronto Star, HST would have actually lowered the tax rates on booze by dropping the existing 12 per cent tax to 8 per cent on July 1st. However, the Liquor Control Board of Ontario is implementing an increase in the cost on alcohol to effectively even things out.

As well, both LCBO and beer stores will be joined by restaurateurs and bar owners in increasing the cost on drinks. As Benzie writes, apparently, Ontario “Premier Dalton McGuinty wants savings passed on to consumers (but) the LCBO has a policy of ‘social responsibility’ which prevents them from bringing prices down to a level which would encourage alcohol abuse.”

We can picture a collective rolling of the eyes all across Ontario. Citizens, of course, are expecting a reduction on alcohol in the midst of all of the increased costs that HST will bring. Instead, they will have to encounter what is being reported as a 7.5 per cent mark-up on alcoholic beverages. This will supposedly keep prices relatively the same as they are now.

“It’s counter-intuitive,” says an anonymous industry official in Benzie’s article, “Tax rates are decreasing because of the harmonization, but the prices on the shelf are actually going to be increased. And that’s going to surprise consumers. They should be expecting a reduction.”

Benzie provides an example of how the mark-up will impact customers: “a 750 millilitre bottle of Wolf Blass Yellow Label Cabernet Sauvignon, a popular Australian red wine that currently retails for $16.35, should be dropping in price to $15.80 thanks to the HST. However, sources say the retail price will jump to $16.45 — only a dime more than it is now, but 65 cents higher than it needs to be.”

Don’t be surprised if LCBO stores throughout Ontario are jam-packed in the days before July 1st. Firstly, to celebrate Canada Day but secondly, and perhaps more significantly, so shoppers can get their hands on as much booze as they can before the price hike. Quite honestly, if the LCBO is attempting to deter increased drinking, their new price policy may not be such a good idea in the short-term.

Nevertheless, residents of both Ontario and British Columbia will have more important things to concern themselves with starting in July. Thinking about how to limit spending in order to afford life’s necessities under the new tax will be of high importance. Let’s hope people don’t try to drown their sorrows with hard drinks as a result. Considering that, perhaps, the price hike isn’t such a bad idea after all.

We see you rolling your eyes again.