Thank you, Chair Easter, and committee members. I really appreciate the opportunity to speak to you this afternoon about part 3 of Bill C-44, on behalf of Canada's $80-billion restaurant industry.
This industry is a vital part of the country's economy. Canadians operate restaurants in every corner of Canada, from large metropolitan centres to remote communities. We are the fourth-largest private sector employer in Canada, with 1.2 million employees who interact with 18 million Canadians daily. A significant number of these jobs are derived from the sale of wine, beer, and beverage alcohol in licensed establishments. We are most proud to be the number-one, first-time creator of jobs in the country. We open the door of opportunity to youth, new Canadians, and those facing barriers to employment. Every dollar spent at a restaurant generates an additional $1.85 in spending in the rest of the economy—well above the average for all industries in Canada.
We indirectly employ more than 250,000 Canadians. More than two-thirds of Canada's restaurants are locally owned and operated by independent entrepreneurs. Our 95,000 restaurants, cafeterias, coffee shops, and bars are gathering spots for people from all walks of life to celebrate, to do business, to spend time with family and friends. Restaurants are also one of the top three reasons for tourists to make Canada their chosen destination.
However, you also need to know that we are an industry with razor-thin profit margins. The average restaurant in Canada takes home a mere 4.3% before taxes. According to Stats Canada, drinking places—that would be the bar and pub sector—have experienced sales declines in six out of the last eight years. Since 2000 the number of drinking places has plummeted by 40%. Beverage alcohol is an important input for restaurants and food service operators, who purchase approximately $3 billion of these products each year, but alcohol prices in Canada have reached the point of diminishing returns with stagnating sales to licensees.
What most Canadians don't know is that licensees often pay more for a case of beer, for a bottle of wine, or a bottle of spirits than consumers purchasing them at their provincial retail store. Once restaurants include the cost of service, glassware, overhead, rent, staffing—and staffing includes training on all service and responsible service of alcoholic beverages—it becomes very expensive for the average Canadian to enjoy a glass of wine, a pint of beer, or a cocktail with their meal.
You can't imagine the surprise of our members when government elected to add more taxes, not less, to alcohol, one of the highest tax commodities in the country, and to increase the tax in perpetuity. We've heard from small-town restaurant and pub operators who are struggling to keep their businesses afloat with rising labour, food, utility, and rent costs. The cumulative effect of the new excise duties will take another big chunk out of their businesses. These are real dollars that cannot be used for hiring staff, investments in innovation and refurbishing their businesses and, in some cases, remaining viable.
Last week we heard from Mr. Coulombe from the Department of Finance during his testimony to this committee. I know that restaurants were disheartened to hear that the department believed that the excise taxes would be so small that it wasn't necessary to analyze the economic impacts. A tax increase from $30 million to almost half a billion dollars in five years is not insignificant, particularly when you consider that the tax will be part of the base price to which all other fees, levies, markups, and provincial and federal taxes will be layered on. The cascading nature of provincial markups and PST, GST, or HST application will mean price increases of up to three times the amount of the federal excise tax for those who purchase alcohol.
This year's federal budget identifies agrifood as a potential growth sector, but a very broad swath of agrifood industries will be hurt by this compounding tax. The hospitality industry, together with the vintners, the brewers, the distillers, the grape and grain growers, and our related supply chain partners, is seeking this committee's support for the repeal of the annual excise duty escalator in Bill C-44 to ensure that all tax increases have oversight by parliamentarians, and that the economic impacts and considerations are factored in.