Alcohol tax cuts in Ontario are in effect. Here’s what you need to know

An LCBO employee moves products in an LCBO store at Union Station in Toronto on Tuesday, March 4, 2025. THE CANADIAN PRESS/Laura Proctor

Ontario’s largest alcohol tax cut in decades officially takes effect today, with the provincial government cutting levies and LCBO markups in an effort to shield local producers from global trade tensions.

The changes, announced in the 2025 provincial budget include significant tax relief for spirits, cider, and ready-to-drink beverages (RTDs), along with new support for microbreweries.

While the Ford government says the move is a response to U.S. trade policies, industry experts say some sectors will remain largely unaffected but others could see some new growth.

What’s changing and who benefits?

In an email to CTV News Toronto, the Ministry of Finance says the cuts include a 50 per cent reduction in the spirits basic tax rate for distilleries with on-site retail sales, a nearly 50 per cent cut to LCBO markups on cider, and reduced markups for wine- and spirit-based ready-to-drink beverages with alcohol content under 7.1 per cent.

Beer made by Ontario microbreweries will also benefit, with reductions to both LCBO markups and the beer basic tax, along with enhancements to the province’s Small Beer Manufacturers’ Tax Credit.

“In the face of President Trump’s tariffs and tariff threats taking direct aim at our economy, we are protecting Ontario business with the largest tax cut to the alcohol industry in decades,” a spokesperson for Ontario’s Ministry of Finance said.

The province is also allocating $100 million in 2025–26 and $155 million in 2026–27 to support these changes.

Scott Simmons, president of the industry trade association Ontario Craft Brewers, said the reforms mark a defining moment for the province’s beer industry.

“The tax cut that takes effect today is a game changer for Ontario’s craft beer sector, one of the biggest things to happen to the industry in a generation, and a great day for locally-owned craft breweries, craft beer lovers, and communities across Ontario,” Simmons said in a statement.

“We represent 80 per cent of all direct brewing jobs in Ontario, and today’s tax changes have put it on a path that will see breweries grow, create even more jobs, invest in their communities, and get more local beer on store shelves — I think that’s something we can all cheers!”

The government also says this is part of a broader effort to modernize Ontario’s alcohol marketplace.

Not all sectors will see the same relief

The Ontario Craft Wineries association says most of today’s changes won’t directly impact traditional wine producers, who saw earlier reforms of their own.

“With regards to taxation and other supports, OCW received some big wins recently including the elimination of the 6.1 per cent wine basic tax and an extension and uncapping of the VQA Support Program,” Michelle Wasylyshen, president and CEO of Ontario Craft Wineries, said in a statement.

But Wasylyshen noted there’s still more work to be done to level the playing field. One top priority, she said, is removing the LCBO administration fee charged to wineries for sales to restaurants — a fee that’s applied even though “the LCBO (is) not providing a service in this transaction.”

She added that the recent shift toward Canadian-made products still presents a rare window of opportunity for domestic wine producers.

“The ‘Buy-Canadian’ movement has given us a once-in-a-lifetime opportunity to get our products into the hands of consumers, onto store shelves and into restaurants,” Wasylyshen said. “Our biggest priority continues to be in sustaining (that) incredible boost in sales.”

What comes next?

While the results of the new framework remain to be seen, the province says they will continue to “champion” domestic businesses.

“We will continue to champion Ontario and Canadian businesses as we work to build a more self-reliant and resilient economy.”