The data is in for BC’s first six months of cannabis legalization and the amount of tax revenue fell far short of expectations.
In the 2018/2019 budget, the BC government predicted the federal excise tax would generate $200 million for BC over the next three years.
That number has been readjusted to $68 million, which means the BC government over-estimated it by almost 300%.
The federal excise tax charges $1 on purchases of $10 or less and 10% on purchases over $10. BC (and the other provinces and territories) get 75% of that money with the remaining 25% going to the federal government.
The new calculation of $68 million over the next 3 years is based on BC’s payment of $1.3 million from the federal government for the first six months of legalization, as confirmed by the Ministry of Finance.
But it’s not just in BC. Tax revenues didn’t live up to expectations in Nova Scotia or New Brunswick either.
But BC’s cannabis tax fail should be no surprise with a legal regime that’s been plagued by product shortages, licensing bottlenecks, and the fact that there are only a handful of legal cannabis stores open provincewide. Plus, edibles and concentrates won’t be legal until October.
There are still no plans to open a government-run cannabis store in Vancouver, which forces consumers in one of Canada’s biggest pot-friendly cities to either buy online on the government website OR go to one of 3 legal retailers.
Of course, you could also go to one of the two dozen or so unlicensed cannabis stores still operating in the city as well.
It’s clear that this situation is of the government’s own making.
Alex Robb, General Manager of Trees Island Grown told CTV News:
“The grey market is more affordable, but it’s also of a higher quality than the legal cannabis that’s currently available”.
A quick look at the cannabis available on the BC Cannabis Stores website (the province’s only legal online cannabis retailer) illustrates what Mr. Robb is talking about perfectly.
Take the Ruxton strain from Broken Coast Cannabis as an example. You’re paying $11.99 per gram (with taxes, that comes to $13.43!) for cannabis with a THC percentage that ranges between 14.9 – 28.7%.
Who pays the excise tax?
It’s important to remember that the federal excise tax is not paid by consumers- it’s paid by licensed producers. In addition to the tax, LPs must also put an excise stamp on every single product to prove it’s legal and that the tax has been paid.
Consumers, on the other hand, are responsible for paying GST and PST, which at 5% and 7% respectively, add up to 12% total.
For more information on cannabis taxes, check out the government website and watch videos on the federal cannabis excise stamp for cultivators, producers, and packagers, distributors, and consumers.
Featured image courtesy of The Province.