Pubdate: Wed, 15 Nov 2017
Source: Calgary Herald (CN AB)
Copyright: 2017 Postmedia Network
Author: Don Braid
Page: A4


Alberta will bear heavy up front costs as Ottawa grabs half the tax on
cannabis sales

Under the proposed federal tax on pot, Alberta will run a cannabis
deficit for several years, according to provincial officials.

This is not an appealing prospect for a government with no shortage of
other deficits.

It explains why Finance Minister Joe Ceci said last week: "I'm not
sure what the federal government is smoking but I can tell you ...
this is not going to work for Alberta."

That may be the sharpest snipe the NDP has ever aimed at the federal

The cost of setting up services, sorting out enforcement, licensing
and inspecting retailers, running education programs, and much more,
will far outstrip revenue, say provincial officials familiar with the

Ottawa proposes a tax of $1 per gram on sales up to $10, and 10 per
cent on any sales above $10. The revenues would be shared on a 50-50
basis with the provinces.

For Alberta, receiving only 50 cents per gram from Ottawa would mean
several years with more government expense than revenue, one
government source said.

Even if Ottawa were to rebate the entire $1 per gram in tax - which
Alberta demands - there would still be deficits for one or two years,
officials say.

On Tuesday, Ceci fired an angry letter to his federal counterpart,
Finance Minister Bill Morneau, stating that "the current proposal to
share revenue 50-50 is not reasonable ...

"Not only will we have the costs related to the implementation and
operation of distribution and regulatory systems, we will also have
significant other costs related to enforcement, road safety, justice,
health and education.

"Our municipal partners have noted they will bear additional

The government wouldn't give revenue estimates for Alberta cannabis

It's all a guess at this point anyway.

Ottawa seems to expect all governments will reap about $1 billion per

Alberta's cost figures will probably be available early next year. But
the government says there's no question it'll face a provincial pot
deficit, only the size of it is unknown.

The pledge to basically eliminate the black market will be expensive.
Even with a vigorous drive to shove out the street sellers and
criminals, the NDP expects illegal sales to persist for years.

The basic problem is the cost of dope. There just isn't much headroom
for tax.

If legal cannabis costs too much, the black market will still

Growers, shippers and retailers will all add their costs on top of the
federal tax, and then take their profit as well.

So, what will high-quality marijuana cost in a new, officially
licensed store?

Will it be $10 a gram? $20? Or more?

That could be too high to quash the black market.

One website that tracks current street prices in Alberta says
high-quality weed is selling for an average of $8 per gram. For medium
quality, it was about $7 per gram.

Many individual sales were for far less. In Edmonton, high-quality
cannabis sold for $4 a gram in one transaction.

This economic squeeze guarantees a classic federal-provincial

Ottawa first rolled out the $1 tax with 50-50 split at a first
ministers meeting in October. It was hotly opposed by the provinces.

The reaction was similar, but angrier, after the official announcement
last week. Provincial finance ministers, including Ceci, will take
their grievances to an Ottawa meeting next month.

One thing Ceci will surely demand is full federal compensation for
Alberta to set up the cannabis sales and control system.

He says Alberta needs more tax flexibility. In other words, Ottawa
should leave the whole tax field to the province.

Alberta is further disadvantaged because the province has no sales
tax. Other provinces will automatically get more revenue from the sale
of a gram.

Basically, Ottawa is shoving a major responsibility on the province,
and then taking half the revenue for none of the cost.

What they're smoking is quite clear, actually. It's a nice bit of weed
rolled in Alberta cash.
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MAP posted-by: Matt