On Monday, the Canadian government announced it had resolved its dispute with the provinces and territories over who gets how much of the cannabis tax revenues- under a new agreement, the provinces get 75% with the federal government receiving the remaining 25%.
The agreement, which will last for the next two years, is much better for the provinces and territories than the fed’s original 50/50 offer, which made many provinces unhappy because, as they claimed, they were on the hook for the majority of the enforcement and distribution costs.
The federal government even capped their 25% share at $100 million, meaning that any revenue above that would be going back to the provinces and territories.
Despite all of that, one province still wasn’t on board- Manitoba, who said that it needs more time to consider the offer. As Manitoba’s Finance Minister told CBC after Monday’s meeting, “I can tell you that in this room today, there wasn’t a single provincial or territorial finance minister who was able to say with any certainty what the costs will be when the legalization of cannabis hits us.”
How much tax revenues are we looking at and what about the municipalities?
Federal Finance Minister Bill Morneau said a recent analysis found that the excise tax would bring in $400 million CDN per year, which is considerably more lowball compared to Liberal MP Bill Blair’s $1 billion estimate from a month ago.
According to the CBC, the Federation of Canadian Municipalities says that cities and municipalities should get a third of that tax revenue for many of the same reasons the provinces used with the federal government, but yesterday’s agreement did not contain any details on how much the provinces would share.
How much will Canadians be paying per gram?
The provinces and territories also agreed to the proposed excise tax of $1 per gram (or 10% of the retail price, whichever is higher), and with a target price for cannabis at around $10/gram, that means Canadians could be paying over $11/gram once you factor in the GST.
But Quebec appears to be doing things differently as the CEO of Hydropothecary told Business News Network that, “I think where Quebec has really differentiated itself and really been a leader here has been to realize that pricing will be key in driving out the black market. So, they’ve actually targeted pricing between seven and eight dollars [per] gram, which is sufficient to start making some serious inroads into the black market,” St. Louis said.