Pubdate: Wed, 08 Nov 2017
Source: Winnipeg Sun (CN MB)
Copyright: 2017 Canoe Limited Partnership
Author: Tom Brodbeck
Page: 5


If Colorado is any indication, provincial coffers will be filled

Premier Brian Pallister may not be holding out much hope that the
province will cash in on a windfall of taxation revenue from the
legalization of marijuana.

But if skyrocketing sales of commercially-available weed in the state
of Colorado - which legalized pot in 2012 - are any indication, the
government of Manitoba could be in for a sizeable revenue stream once
the industry shifts into high gear.

Pallister announced Tuesday that recreational marijuana, which becomes
legal on July 1, 2018 under federal legislation, will be regulated by
the provincial Liquor and Gaming Authority but sold through private
retail outlets. The province issued a request for proposals Tuesday to
solicit bids from private retailers.

So far, the premier has downplayed speculation that the sale of
recreational marijuana could be a boon to provincial coffers,
emphasizing instead the potential costs - like greater policing and
health care expenditures - that could be associated with increased pot
use. The jury is still out on that.

But what is almost certain is that through federal and provincial
taxes - depending on what kind of taxation scheme is chosen - the
province is expected to bring in millions in new revenues from
marijuana sales, from both taxation and whatever licensing and other
fees are levied.

In Colorado, where recreational marijuana has been sold legally at the
retail level since 2014, the state brought in $193.6 million in taxes,
fees and licencing revenues from pot in 2016. And a good chunk of that
money goes directly into the state's public schools system.

Colorado just increased the excise tax it charges on recreational
marijuana to 15% from 10% in July on top of other taxes and fees that
are tagged on. Under state law, the first $40 million of that goes
directly to the state's Building Excellent Schools Today fund, a pool
of cash earmarked for the construction of new public schools.
Additional money raised from pot taxes goes to other aspects of the
K-12 school system, including funding for drop-out prevention programs
and early literacy.

So far, there are no firm revenue projections for pot sales in
Manitoba, at least none the Pallister government is willing to share.
When asked about it Tuesday, Pallister said some projections will be
released in the near future. Instead, he continued to stress the added
costs that may arise from legalizing cannabis.

It's unlikely, though, that any new costs associated with legal weed,
which would be difficult if not impossible to quantify in any event,
would outstrip government revenues. To be sure, it's uncharted
territory for Canadian jurisdictions like Manitoba, which will have to
find the delicate balance between charging enough to make money off
legal dope while keeping prices sufficiently low to undercut the black

One of the chief objectives of legalizing marijuana in Canada is to
cut off the lucrative revenue streams it provides for organized crime.
If prices are too high for legal weed, including taxation levels -
something Colorado struggled with in its early days - it will be less
effective at overtaking black market sales. If it's cheaper for people
to call their dial-a-dealer, that's where many will continue to go.

But it's difficult to imagine government not generating some pretty
lucrative net revenues from this new industry.

What is unfortunate is that the Trudeau government has already laid a
claim to at least a 10-point share of whatever taxes are applied to
marijuana sales. It's the provinces, not the feds, that will bear the
majority of the costs associated with the distribution, regulation and
sale of marijuana, not to mention any additional health care costs
that may arise. So it's the provinces that should get the majority of
the taxation revenue. Besides, this would have been a good opportunity
for Ottawa to cede some tax room generally to the provinces to help
with the growing costs of health care, justice, education and child

Either way, legal pot sales are likely to be a bigger boon to
provincial coffers than Pallister is letting on. It will likely turn
out to be an important revenue stream that will undoubtedly help the
Pallister government balance its books one day.
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