Ottawa and Canada’s provinces have struck a deal on how tax revenues collected on the sale of recreational marijuana will be shared.
The agreement, announced on Monday, will see the federal government give the provinces and territories 75% of federal excise tax revenues from the sale of legalized marijuana – due to come into effect on July 1, 2018 – a portion of which will be given to cities and towns to help them defray the cost of making the drug legal across Canada.
Federal Finance Minister Bill Morneau announced the two-year deal after a day-long meeting with his provincial and territorial counterparts. The federal government in Ottawa will retain the remaining 25% share to a maximum of $100 million a year, with any balance over and above that limit going to the provinces and territories.
Provincial and territorial governments anticipate that, during the first couple of years, legalized marijuana will involve significant start-up costs, such as the creation of the new pot market, enhanced law enforcement, public-awareness campaigns and additional health services.
Minister Morneau said that in each of the first two years, he expects legalized marijuana to generate only about $400 million in excise tax revenues annually. But after those initial years, there’s potential for the marijuana market to generate significant sums of money for governments.
Provincial finance ministers said Monday that the $100-million cap on the federal share of marijuana tax revenue is important as it will ensure that their governments can respond to the marijuana marketplace as it grows and evolves.
Minister Morneau said the decision to provide a larger share to the provinces will allow them to “fairly deal with their costs” and enable them to work with municipalities, which had been asking for a one-third portion of the tax revenue to help ease the local burden of costs such as law enforcement. To help counter the illicit market for marijuana, the ministers agreed to keep the per gram price of legal marijuana at $10 or lower.
Minister Morneau added that he and the provincial / territorial finance ministers are scheduled to gather in a year to assess how the framework and revenue sharing on marijuana is working.
