Pubdate: Wed, 13 Dec 2017
Source: Winnipeg Free Press (CN MB)
Copyright: 2017 Winnipeg Free Press
Author: Dan Lett
Page: B4


WHEN politicians talk about the arrival of legal cannabis, they make
it sound like it's going to be more trouble than it's worth.

Oh, the worry. According to the narrative coming out of the federal
and provincial capitals, legalizing pot is going to involve enormous
costs with very little return, in terms of tax revenue.

There are expected to be increased costs for provinces and
municipalities in the areas of law enforcement, public education,
health care and addictions treatment at a time when governments of all
levels are having trouble generating the revenues needed to sustain
core services.

And what of the offsetting tax revenues? Again, listening to the
politicians, you'd be convinced there isn't much of a windfall on the

No one claims to know with any precision what the Canadian market for
legal pot is going to look like. As a result, no one wants to make a
firm prediction on exactly how much money governments will reap.

The result is a scenario presented that suggests there is much to lose
and very little to gain.

Most of this is, quite obviously, misdirection.

There will be additional costs, but the experiences of other
jurisdictions suggest they will be manageable. As for revenues, you
can bet your favourite bong the federal and provincial governments are
deliberately underestimating the magnitude and importance of the money
that will soon flow into their treasuries.

The attempts to play down the revenue side of the legalized pot debate
can be seen in negotiations between the provinces and Ottawa over tax

Canada's provincial finance ministers met this week with their federal
counterpart Bill Morneau to discuss a wide range of issues, including
marijuana taxation. Ottawa had initially proposed a $1 federal excise
tax - roughly 10 per cent of the final retail price of about $10 per
gram - with half of the revenue being shared with the provinces.

How much money is at stake?

Ottawa claims the excise tax alone will bring in about $400 million
annually; some provinces have estimated it could be as high as $650

The provinces pushed back on that opening position and, in a rare act
of deference, Morneau agreed to up the provinces' share to 75 per cent
of excise tax revenues and then cap the federal portion at $100 million.

This was being marketed as a major compromise to help the provinces,
which will bear the brunt of the costs associated with legal pot.

Of course, that is not the true, full picture on how much money will
be in play from federal taxation.

The federal government will also collect GST on pot sales, and that
money is not expected to be shared with other levels of government.

Add together the excise and federal sales taxes, and there have been
some estimates Ottawa stands to collect in excess of $1 billion annually.

Those calculations are not lost on the provinces, which rightly
believe there is an opportunity to both insulate themselves against
additional costs for overseeing marijuana sales, and add much-needed
own-source tax revenue at a time when existing taxes are not covering
the escalating cost of core services.

This thinking is, no doubt, driving some of the decision by Manitoba
to - yet again - hold out its support for a federal initiative.

To almost no one's surprise, Finance Minister Cameron Friesen did

"sign on" to the federal marijuana excise tax deal, claiming he needed
more time to assess its impact.

Manitoba has made a habit of holding out, having withheld its support
from both the federal carbon tax plan and health-care accord. The
results of this strategy have been, shall we say, ambiguous.

That does not mean holding out on this issue is a bad

Particularly when there is a compelling argument Ottawa should allow
the provinces to reap all tax revenue from legal weed sales.

Against the wishes of the provinces, the federal Liberal government
abandoned a campaign pledge and reduced the rate by which health-care
transfers increase every year.

This was a bitter pill for the provinces to swallow, and many premiers
haven't quite shed their grudges.

In the context of that decision, Ottawa's offer to "share" federal pot
taxes seems pretty presumptuous.

However, just as the provinces are challenging Ottawa's eligibility to
share in revenues so, too, are municipalities challenging their
provincial masters to do the right thing with pot taxes.

As providers of law enforcement, larger municipalities have a strong
case to make for getting a significant share of pot tax revenue.

That has not, however, convinced the provinces to strike any formal
deals on how much money they are willing to provide, or whether they
will allow municipalities to impose their own fees and excise taxes on

Taken together, all the commentary about, and debate over, the future
of pot tax revenue is a little like a family meeting to divide up the
assets of a dearly departed relative.

No one wants to appear too needy or greedy.

Yet, no one is willing to demonstrate any genuine generosity,

Even though no one is quite sure of the size of the market for legal
marijuana, it is a safe bet many Canadians will partake and, in so
doing, produce gobs of tax revenue for governments to fight over.

At some point, all three levels of government should sit down and
discuss a fair distribution of this new revenue. Used effectively, it
could help municipalities pay for infrastructure, help balance
provincial budgets and pay for improvements to law enforcement and
health care.

If Ottawa insists on taking too large a share of the windfall that is
coming, the result will be resentment, dysfunction and, for some time
to come, rifts with leaders at the two other levels of government that
will not be easily healed.

The federal Liberals made the decision to legalize

Now, they must find a fair and just way of sharing the wealth to come.
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