Cannabis Tax Revenues in Canada
The Canadian federal government has announced a two-year deal with the provinces and territories for 75 percent of the Cannabis tax revenues. The total is estimated to be $400-million in the first two years, eventually increasing to $1-billion annually, with the remaining revenue going to Ottawa for a maximum of $100M per year.
The revenue comes from a proposed Cannabis excise tax of $1 per gram or 10 percent of the final retail price; whichever is greater. The deal also gives provinces the discretion to include markups above existing taxation levels, as per the Premier of Nova Scotia Stephen McNeil in this article written by Fred Chartrand.
The revenue is expected to help municipalities cope with the financial impacts recreational Cannabis will bring. These include administrative, law enforcement, border security, zoning, by-law costs and educating the public. The federal government has plans to meet again in December 2018 to reassess the deal, to determine how the market is working and what the policy and education components actually cost.
Calgary Mayor Naheed Nenshi is expecting 1/3 of the provinces share to go directly to municipalities and hopes it’s share will be based not only on population but by the cities share of business and industry. He also shares his concerns about how important a seamless ‘fund-sharing model’ between the federal and provincial governments will be in this Calgary Metro article.
The existing black market is a well established, complex system and is unlikely to disappear overnight. Federal Finance Minister Bill Morneau says “…by keeping prices low, will over time, get rid of the existing black market”. Donald MacPherson, who is the Executive Director of the Canadian Drug Policy Coalition, shares his thoughts with the Canadian Press: “It’s really the degree to which the regulated system can, over a period of years, encroach on the pre-existing market.”
Some provinces openly questioned what costs the federal government would be incurring to justify the initial 50/50 revenue split offering. It’s seen as a positive step that Ottawa is willing to share more of the revenue than originally planned. Both the federal and provincial governments need to cover their costs is legitimate to avoid increasing residential property taxes.