Pubdate: Wed, 15 Nov 2017 Source: Calgary Herald (CN AB) Copyright: 2017 Postmedia Network Contact: http://www.calgaryherald.com/ Details: http://www.mapinc.org/media/66 Author: Don Braid Page: A4 LEGAL POT MEANS EVEN MORE RED INK FOR THE PROVINCE 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 Liberals. 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 file. 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 costs." The government wouldn't give revenue estimates for Alberta cannabis sales. It's all a guess at this point anyway. Ottawa seems to expect all governments will reap about $1 billion per year. 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 thrive. 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 battle. 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. - --- MAP posted-by: Matt