Residents of Nunavut could be subject to a tax on liquor purchases if a new bill passes the Legislative Assembly.
The bill, called the Liquor Tax Act, was introduced on May 24. Currently, Nunavut, the Northwest Territories and Alberta are the only jurisdictions in Canada without liquor tax, either directly or through the HST or PST.
The Government of Nunavut held consultations on the bill across the territory during the winters of 2020 and 2021, said Sean Clark, director of tax policy at the Nunavut Department of Finance.
He said the overarching message the GN heard then was that Nunavummiut wanted alcohol taxed.
“Alcohol imposes social harm and the public deserves compensation,” Clark said.
The bill would impose a tax on all alcohol sold and consumed in Nunavut, meaning consumers would pay alcohol tax as a percentage of a product’s retail price.
This tax would belong to the Government of Nunavut and be used at the pleasure of the members of Parliament.
The amount of tax would vary depending on the product, but generally the higher the percentage of alcohol in a product, the higher the tax would be, Clark said.
Final rates will not be determined until the bill passes the Assembly, but they could vary between 5 and 25%.
The tax on liquor brought into the territory by permit would be collected on a volume basis and applied to the cost of the permit itself.
The tax would not apply to personal home brew and alcohol exempt from import brought into the territory, i.e. below the legal limit required for a permit.
The bill also provides for penalties for non-payment of the tax, including seizure of liquor, imposition of fines ranging from $500 to $10,000 and imprisonment of up to six months.
Clark said he hopes the bill will deter people from smuggling into the territory, saying the tax could provide an administrative alternative to police enforcement of contraband.
The tax could also reduce alcohol consumption through higher prices, Clark said, while warning people not to expect a drastic change in behavior right away if the bill passes.
“We need to be clear and recognize that while we need to keep our revenue ambitions in check, we also need to keep our consumption ambitions,” he said.
“It’s not going to solve or transform the problem of excessive alcohol consumption overnight.”
A similar bill was introduced in October 2020, but it did not pass until the legislature dissolved for last year’s territorial elections.
The Liquor Tax Act is expected to be considered during this sitting of the Legislative Assembly, but if passed it will likely not be implemented until the fall.