Pubdate: Thu, 22 Feb 2018
Source: Globe and Mail (Canada)
Copyright: 2018 The Globe and Mail Company
Author: Mike Hager
Page: A9



British Columbia is expecting legalized cannabis to bring in
$75-million a year to the province in taxes, with legal sales
estimated to be worth a billion dollars.

This week's provincial budget estimates that once the drug is
legalized later this year, the province will take in $50-million in
the current fiscal year and $75-million in 2019-2020, the first full
fiscal year under legalization.

That represents the province's 75 per cent share of a federal excise
tax, which Ottawa has said will be $1 per gram, or 10 per cent of
larger purchases, whichever is higher. While that translates to about
$1-billion in sales in the province, B.C.'s Finance Minister says it
could be higher.

"We went with a very conservative number of what we expect the sales
to be," Finance Minister Carole James told reporters on Wednesday in
Victoria. "This is just the federal money, we put no provincial PST or
any of those resources in there. There are costs in the budget that
will offset most of those resources that are coming in, so we will not
be making money in the first couple of years."

New Brunswick, the only other province to announce its revenue plans
for legal sales, estimated in its budget tabled in January that it
will get about $6-million in gross revenue this fiscal year from taxes
on the drug and another $1.2-million in gross revenue from the public
corporation in charge of retail. Quebec's Finance Minister told
reporters last December that he estimates his province could receive
$60 million from the excise tax.

B.C.'s budget provided no clarity on how much it will cost the
province to set up its own licensing and enforcement regime for a new
private-public network of standalone marijuana outlets. A
representative for the Liquor Distribution Branch, which will be in
charge of licensing private retailers and supplying wholesale cannabis
products to the legal system, did say that a new $57-million warehouse
in Delta, B.C., will be for alcohol only, and a new separate site to
store cannabis will have to be built.

In its supplementary budget document, the agency said too much is
still unknown to quantify all these costs.

Neil Boyd, head of Simon Fraser University's criminology school and a
scholar of prohibition, said the province's estimate seems about
right, if not a little bit high, based on about 12 to 15 per cent of
its 4.6 million inhabitants spending hundreds of dollars a year on
legal cannabis products.

"To say that it's going to be a third of liquor sales, in some ways
that surprises me, but it's not completely out of line," said Prof.
Boyd, who added about $3-billion worth of alcohol is sold each year in
the province.

The biggest challenge of the new regime will be to displace existing
infrastructure through which cannabis and edible products are
illegally sold in physical stores and through the internet.

The government hopes that once the drug is officially legal, consumers
will buy through government-regulated retailers, with law-enforcement
authorities continuing to crack down on other outlets.

Statistics Canada estimates that the country's cannabis black market
was worth as much as $6.2-billion in 2015.

Last December, the federal finance ministry estimated the excise tax
alone will raise about $400-million a year initially. If the revenue
turns out to be larger, Ottawa has agreed to cap its share at

Meanwhile, most provinces are still negotiating with municipalities on
how much of this tax money will be passed down to local governments in
charge of regulating and policing this new sector at a local level.

Vancouver Councillor Kerry Jang, co-chair of B.C.'s
provincial-municipal committee in charge of crafting the province's
cannabis rules, said the province will soon meet with cities to
discuss this revenue sharing.
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