Wednesday, January 3, 2018

An Object Lesson For Canada

Since the avowed aim of legalizing recreational cannabis is to keep the product out of the hands of kids by driving out the black market, our federal and provincial governments would do well not to get too high anticipating huge tax revenues from its sale. The trick, of course, is to find the sweet spot, one that the black market will have a hard time combating.
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.
Whether that is a reasonable level remains to be seen, but I doubt there can be too much disagreement about the massive mistake unfolding in California, where recreational cannabis became legal on January 1.

In today's Globe and Mail, Andre Picard breaks down California's taxation regime this way:
... the in-store price – about $50, similar to the street value – of an eighth-ounce (3.5 grams) of top-quality product will reach $65 after taxes. Canada is looking at a minimum price of $8 to $10 a gram, plus a $1 a gram excise tax and federal and provincial sales taxes.
Given that the black market has thrived for many years in California and elsewhere, it is likely the onerous tax regime imposed on California will have to be reduced; otherwise, it seems hard to believe the majority would choose to pay so much more for their pot simply because stores offer more convenient shopping opportunities.

Marijuana, I read, is not an addictive drug. Let's hope that in Canada, our governments do not become addicted to the tax profits legalization will provide.


  1. 28 grams to an ounce. $280 an ounce. I spoke with a grower who believes that price won't put a dent in his market. From what I'm told they're about $100 per ounce too high.

    This fellow is already preparing to launch a new business - home hydroponics. The customer grows the planets in their own home. He sells the gear and handles the installation. Then he negotiates a service contract under which he periodically visits the home to tend the plants (apparently that's a tricky process) to ensure a good and bountiful product.

    1. While government pricing may not put a dent in the black market, it appears it will open up entrepreneurial opportunities for some, Mound.