Pubdate: Tue, 20 Feb 2018
Source: Winnipeg Sun (CN MB)
Copyright: 2018 Canoe Limited Partnership
Author: Tom Brodbeck
Page: 7


Pallister government not budgeting for pot tax revenue this year

If the Pallister government projects a reduced deficit in the 2018
provincial budget, it won't be because of a new pot tax.

The Winnipeg Sun has learned that next month's budget will not include
a revenue line from marijuana sales, even though legalized pot is
expected to go on sale sometime later this year.

Finance Minister Cameron Friesen confirmed government is not budgeting
for any marijuana revenues in 2018-19 and is still examining the
potential costs associated with legalized weed, including additional
health care, road safety and justice costs.

"We are working diligently to measure and calculate these costs,"
Friesen said in a statement to the Winnipeg Sun. "For these reasons,
we do not expect a revenue windfall from pot, and we do not intend to
print a revenue line for pot in our upcoming budget to be announced on
March 12."

The amount of money governments expect to raise from the sale of pot
remains one of the many unknowns as the federal government moves to
make recreational marijuana a legal product after July 1.

In U.S. jurisdictions like the state of Colorado, where recreational
marijuana has been legal for several years, pot taxes are lucrative
and line government coffers with tens of millions of dollars a year.
Colorado earmarks much of its marijuana revenues for education
funding, including for capital costs like new public schools. But
there's plenty of debate about what the real net revenues are from the
legalization of marijuana after accounting for pot-related costs like
increased health care and justice expenditures.

Whatever the case, Friesen said government won't be budgeting any pot
revenues whatsoever in the upcoming year.

"What we know for certain, and all provinces agree, is that the
province will bear the majority of the cost for legalization of
cannabis, including healthcare, education, road safety, justice and
more," said Friesen.

And there's also the thorny issue of how to price legal pot to compete
with the black market. If prices and taxes are too high, many will
continue to buy from their dealer on the black market. Governments
will have to figure that out before they can even begin to include pot
tax revenues in their budgets.

"If we don't price competitively, we don't gain market share and the
black market will continue to thrive, which is bad for Manitobans and
particularly bad for our kids," said Friesen.

There's even one school of thought that believes once recreational
marijuana is available legally and becomes a more mainstream drug of
choice, it will act as a substitute for alcohol. If that happens, it
could impact government's lucrative tax revenues from beer, wine and
hard liquor.

Between new costs associated with legal pot, pricing limits driven by
the black market and possible revenue losses from a drop in alcohol
sales, bean counters in government really don't know what kind of net
revenues to expect. They do know they'll eventually make some money
from legal pot. They just don't know how much. It's uncharted territory.

And any hope of relying on it to help reduce the deficit this year is
simply not realistic. That's especially true since it appears the
implementation date for legal pot has been pushed back until at least
August or September, due to legislative delays in Ottawa on the pot

Even if legal pot goes on sale Sept. 1, that would only leave seven
months in the 2018-19 fiscal year to generate marijuana revenues for

The province will likely raise some money this year from marijuana
sales. But it probably won't be much. Whatever it does generate will
be bonus revenue from a budgeting perspective. Government will have a
better idea a year from now just how lucrative legal pot will be when
it introduces its 2019 budget.
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