Breaking down Ontario’s prohibition-era liquor laws to allow local stores to sell alcohol would lower prices while generating more revenue for the government than current “quasi-monopolies,” according to a new report.
Alcohol can only be sold in Canada’s most populous province through government-run stores, a beer retailer majority-owned by Anheuser-Busch Inbev NV (ABI) and Molson Coors Brewing Co. (TAP), and a chain of wine stores operated by the country’s two largest winemakers.
“The lack of competition in Ontario’s system for alcoholic beverage retailing causes higher prices for consumers and foregone government revenue,” the C.D. Howe Institute, an economic-policy research firm, said in a report today.
The Liquor Control Board of Ontario, one of the world’s largest buyers of alcohol, reported C$5 billion ($4.6 billion) in sales in the year ended March 2014 and delivered C$1.74 billion to government coffers, according to its website. The LCBO also transferred C$791 million in sales taxes to the government while the Beer Store delivered C$1 billion in taxes, according to the Toronto-based C.D. Howe.
In British Columbia and Alberta, where there is some privatization of liquor sales, revenue to government was about 7 percent higher than in provinces with government-run stores. A more competitive liquor market in Ontario could increase alcohol-related revenue to the government through taxes on increased sales and efficiencies gained from cutting costs, the report said.
Toronto-Dominion Bank Chief Executive Officer Ed Clark is conducting a review of provincial assets, including the LCBO, for Ontario’s Liberal government as it battles a deficit it expects to reach C$12.5 billion at the end of March. The asset review is to be completed by year-end.
“We believe Ontarians are well-served by the current model,” Susie Heath, a spokeswoman for Finance Minister Charles Sousa, said in an e-mailed statement.
There may be opportunities for the private sector to own or run “components” of the LCBO, Sousa said in April.
For now, the LCBO is opening kiosks in 10 grocery stores in the province. “Ontario’s wine and beer industries are an important part of the province’s economy and we are committed to building on their success,” Heath said.
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