Cannabis in Canada Pt 7
Part Seven: The Taxation of Cannabis
One of the most favourable arguments for the legalization of cannabis is the increased tax revenue it will bring to the Canadian economy. With recreational and medicinal sales reaching almost $1 billion in 2015, Colorado collected more than $135 million in taxation revenue and fees. This money was then used for the state’s public school construction assistance fund and for public programs around substance abuse and regulation of cannabis use.
In Canada, the proposed federal excise duty rate would be $0.50 per gram of cannabis, or 5% of the producer’s sale price of the product. This would apply to all cannabis products available for legal sale and to medical cannabis. These duties are paid by manufacturers. Cannabis product sales are taxable under GST and HST, and paid directly be consumers at point of sale.
The Trudeau government had originally proposed giving provincial and territorial governments half of the estimated $1-billion annual excise tax, but provinces and municipalities negotiated getting 75% of the cannabis excise tax for the first two years. Additionally, the federal portion of the excise tax revenue will be capped at $100 million annually. It is up to the provinces to negotiate revenue-sharing with municipalities. Morneau said legalization will cost the federal government at least $700 million at the outset, but this could add up to be more.
The provinces have released their budgets for 2018-2019. Nova Scotia is projecting a 19.4 million surplus related to the taxes the government is expecting to receive from the sale of cannabis. However, the NSLC is not expecting the sale of cannabis to turn a profit. The Ontario Cannabis retail corporation is not expecting to generate profits immediately, and is expecting a $40 million loss in 2018-2019, but expected $100 million in net income in 2020-21.
Links to articles in this series:
- Part 1. The Road to Legalization: Why Canada and Why Now?
- Part 2. A (very) brief history of Cannabis in Canada.
- Part 3. The Cannabis Task Force - Summary of Feedback and Recommendations.
- Part 4. Rushed Legislation and Policy-making.
- Part 5. The Debate over Age Requirements.
- Part 6. Provincial Distribution Models.
- Part 7. The Taxation of Cannabis.
- Part 8. Evidence-Based Policy?
- Part 9. The Future of Edibles.
- Part 10. Public Safety and the Issue of Impaired Driving.
Photo credit: Ryan Lange from Unsplash.
- By Heather Webster