Pubdate: Wed, 02 Nov 2016
Source: Globe and Mail (Canada)
Copyright: 2016 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Mike Hager
Page: S1
Cited: http://mapinc.org/url/wNIRvRti

POT TAX WOULD REDUCE PROFITS, ALLOW BLACK MARKET TO THRIVE: REPORT

The parliamentary budget watchdog says Ottawa stands to generate
hundreds of millions of dollars - not billions - from the first year
of recreational marijuana sales, and that the black market will
continue to bloom if the federal government applies much more than a
sales tax on legal pot.

In a report released on Tuesday, the Office of the Parliamentary
Budget Officer says sales tax revenue could be as low as $356-million
and as high as $959-million, with a likely take of about $618-million
based on legalized retail cannabis selling for $9 a gram - in line
with current street prices.

Those government revenues will increase in future years for a variety
of reasons, says the report, including more consumption and price
competition among increasing numbers of licensed producers.

But Ottawa may not be able to tax cannabis in the same way as tobacco
without pushing the price well beyond that of illegal pot, the report
added.

Assistant budget officer Mostafa Askari, who helped with the report,
said that overall "the message is that there really isn't very much
room for revenue over time."

He said U.S. states that have legalized pot have found that revenue
streams cannot be tapped too aggressively without pushing the market
back underground.

Using Colorado's first full year of sales as an example, the report
states a 30-per-cent combined tax on recreational products meant only
5 per cent to 10 per cent of cannabis consumers bought them. More than
half continued to use underground dealers and the rest got
prescriptions for legal medical marijuana, which was taxed at less
than 11 per cent, the report stated.

The more people that are allowed to produce and sell products, the
more the price of legal cannabis will come down, said Kirk Tousaw, a
lawyer who helped win a constitutional challenge that led to an
overhaul of the medical marijuana system this summer after a judge
ruled it was too expensive.

"The driving factor is going to be: Can producers easily enter the
production space or is it going to be top heavy as it is now," said
Mr. Tousaw, who also represents dozens of illegal dispensaries. The
budget office's report stated that, in the most recent fiscal year,
more than 30 commercial growers licensed to sell medical marijuana
produced less than 2 per cent of the 655 metric tonnes of cannabis
recreational consumers will want in 2018.

Mr. Tousaw said these medical cannabis producers are forced to charge
clients more than illicit producers do because of an onerous federal
regulatory regime. These licensed medical producers mail cannabis to a
small portion of the hundreds of thousands of people using the drug,
many of whom have turned to illegal storefront dispensaries.

"It's absurd and imposes tremendous cost on producers just to comply
with unnecessary rules and restrictions," he said of the current
medical system of production.

Predictions of a government pot bonanza in the billions of dollars
annually have become common since the Liberal government of Justin
Trudeau came to office last year promising full legalization.

A B.C. Liberal Party report in 2013 suggested $4-billion annually in
taxes from legalized pot. CIBC World Markets issued a report last
January saying federal and provincial taxes could pull in as much as
$5-billion a year from legal marijuana.

A new report from a Denver-based consulting firm says CIBC
over-estimated the potential tax revenues by about 300 per cent.

The government has played down any revenue windfall.

The Liberals have said any pot proceeds would be directed to addiction
treatment, mental health support and education programs. Provinces and
territories will also have a significant say in how cannabis revenues
are spent. The PBO study says about 60 per cent of marijuana taxation
will flow to the provinces.

Vancouver councillor Kerry Jang, architect of the local dispensary
bylaw, said cities deserve to receive some of that money if they are
expected to enforce federal cannabis laws. "We're not going to be
increasing taxes on our ratepayers for this," he said.
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MAP posted-by: Matt