The Canadian Press
Andy Blatchford
OTTAWA–Canada’s finance ministers struck a deal yesterday on how they plan to share tax revenues during the cost-heavy start-up phase of a legalized marijuana market.
But they also kept their options open–just in case lucrative days lie ahead.
The new agreement will see the federal government give the provinces and territories a 75 percent share of federal excise tax revenues from the sale of legalized pot, a portion of which will be meted out to cities and towns to help them defray the cost of making cannabis legal across Canada.
Federal Finance minister Bill Morneau announced the two-year deal after a day-long meeting with his provincial and territorial counterparts.
Ottawa, which intends to legalize recreational cannabis in July, will retain the remaining 25 percent share to a maximum of $100 million a year, with any balance over and above that limit going to the provinces and territories.
Over the first couple of years, ministers predict legalized marijuana will involve significant start-up costs, such as the creation of the new pot market itself, beefed up enforcement, public awareness campaigns, and additional health services.
Morneau said that in each of the first two years, he expects legalized pot to generate only about $400 million in excise tax revenues.
Ministers doubt the funds will be enough to cover their start-up costs.
But after that, Ontario Finance minister Charles Sousa suggested there’s potential for the brand new market to generate far more for public coffers.
“Going forward, we know that there is demand for cannabis–there’s quite a bit already and the illicit market is rather huge,” he said after yesterday’s announcement.
“The federal government has estimated around $400 million or so in revenues in the first year or two years–it may grow and it likely will grow substantively,” Sousa added.
“So we want to take the appropriate measures now to combat the illicit market, get it out of the system, and then go forward . . . to deal with revenue.”
Sousa added the $100-million cap on the federal share is an important piece of yesterday’s agreement because now, “if there is a surge in the marketplace, we can accommodate it more effectively as we grow and respond to that marketplace.”
Morneau said the decision to provide a larger share to the provinces will allow them to “fairly deal with their costs” and enable them to work with municipalities, which had been asking for at least a one-third portion of the revenue to help ease the local burden of costs like law enforcement.
To eliminate the illicit market, the ministers agreed to keep the per-gram price of legal pot at roughly $10, or even lower.
“Our expectation is that by keeping prices low, we will be able to get rid of the black market. However, that will happen over time,” Morneau said during the closing news conference, his counterparts lined up behind him.
“Of course, we’ll stay very much on top of this.”
He said the ministers are scheduled to gather again a year from now to assess how the framework is working.
