Pubdate: Wed, 03 Jan 2018
Source: Toronto Star (CN ON)
Copyright: 2018 The Toronto Star
Author: Josh Wingrove
Page: B1


Legal weed will have to compete with black market, Bill Blair

OTTAWA- Justin Trudeau's marijuana czar is warning that policy-makers
may need to adjust taxes to prevent prices from falling too low after
legalization. Canadian marijuana companies - which have surged in
value - will achieve economies of scale that will help drive down
production costs, according to Bill Blair, the lawmaker and former
Toronto police chief leading the legalization effort.

Prices and taxation levels will then need to be monitored to keep them
competitive enough to achieve the government's goal of starving out
the illegal market, without pricing things too low and encouraging
excess use, Blair said in an interview last month.

"You've got to pay a lot of attention to what's going on in the
illicit markets," he said.

Legal pot needs to be "competitive in not just price but in quality
and choice and accessibility."

Marijuana firms including Canopy Growth Corp., Aurora Cannabis Inc.,
Aphria Inc. and MedReleaf Corp. surged last week to close out 2017.

Canopy ended the year with the best returns on the S&P/TSX Composite
Index, data compiled by Bloomberg show, and the BI Canada Cannabis
Competitive Peers Index reached a new high last week. Some analysts
are skeptical about demand projections, and betting against the stocks
is difficult to do.

Canada plans to legalize recreational pot use by the summer, though
the law to do so is wallowing in the Senate. Leisure use began in
California this week, and Blair said other jurisdictions have seen
prices fall as their markets develop.

"I think there are, almost inevitably, economies of scale that will be
realized both in production and in the distribution," Blair said.
"Over time, prices do come down."

In a followup written statement, Blair said the price of pot will be
determined both by the market and by provincial regulators.

"The provinces may use both price and tax levers to maintain a price
that is both competitive with the illicit market and not so low as to
create an incentive for increased use," he said.

The Canadian government projects an annual market of about $4 billion
for legalized marijuana. The country's finance ministers have agreed
on a marijuana excise tax of 10 per cent of the product price, or $1
per gram, whichever is higher.

Sales taxes, ranging from 5 per cent to 15 per cent across provinces,
will also be applied. The federal government has agreed to hand over
at least 75 per cent of excise tax revenue to provinces for the first
two years after legalization.

Nick Dean, chief executive officer of licensed medical producer Emblem
Corp., said he expects the marijuana industry will be able to compete
with the black market.
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MAP posted-by: Matt