Pubdate: Wed, 02 Nov 2016
Source: Ottawa Citizen (CN ON)
Copyright: 2016 Postmedia Network Inc.
Author: Ian MacLeod
Page: NP4


Revenue likely to be in millions, not billions

Legal marijuana must be carefully taxed and competitively priced or
consumers will retreat to the black market, negating a core rationale
for legalization, the parliamentary budget officer said Tuesday.

Should the Liberals follow that advice it means recreational pot
sales, initially at least, will generate only modest sales tax
revenues - about $618 million a year - and not the cash cow some
predicted. What's more, 60 per cent of that money will go to the provinces.

"We're talking millions and millions, not billions and billions of
dollars of revenue," Parliamentary Budget Officer Jean-Denis Frechette
said after releasing his office's study on what Canada's retail
marijuana market might look like.

"The potential for revenue is very, very low," added Mostafa Askari,
the assistant PBO.

"The illicit market, their profit margins are very high, so they have
room to compete with the legal market, which makes it even more
difficult for the government to set the price and the tax rate.

"If they want to achieve their objective of reducing the share of the
illicit market, they always have to be conscious how the legal prices
compare to the illegal prices."

Liberal MP and former Toronto police chief Bill Blair, the
government's point man on legalization, said the government has never
seen legalization as creating a cash cow.

"Absolutely not," he said. "Our goals are to protect our kids, protect
our communities by eliminating organized crime's involvement and
protect the health of Canadians.

"We recognize that in order to discourage its use among young people,
but also to eliminate organized crime, price, quality and access are
important considerations, and all of that is being worked on."

The PBO says if the average legal price is lower than or equal to the
current average national illicit price of $9 a gram, illicit market
revenues can be squeezed to about $100 million. But if legal cannabis
were priced at $15 a gram, illicit market revenues would approach $4

"When the average legal price is less than or equal to the average
illicit price, 98 per cent of consumption is projected to shift to the
legal market in 2018," it says.

Yet keeping the legal price competitively low would seem to rub
against another core rationale for legalization: limiting and
controlling access to the drug and discouraging its use.

The report estimates 4.6 million Canadians 15 and older will use
cannabis at least once in 2018. Most - 98 per cent - would come from
the 41 per cent of users who use it at least once a week or daily. By
2021, the number of pot consumers is projected to rise to 5.2 million.

But imposing an additional excise or "sin" tax would cause a serious
price imbalance between the legal and illegal markets, giving a
significant advantage to organized crime groups.

A nine-member expert task force, led by Anne McLellan, a former
Liberal minister, is to report to the government this month on how
recreational marijuana should be produced, sold, consumed and
otherwise regulated.

Legislation, due to be tabled in Parliament next spring, would end the
93-year criminal prohibition against simple possession of marijuana
for non-medical, personal use.
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