After a daylong meeting, federal Finance Minister Bill Morneau and his provincial counterparts have agreed to a 75/25 per cent split of marijuana tax revenue, with a majority going to the provinces. Ottawa originally pitched a 50/50 split with the provinces, but that idea was rejected.
“We believe, especially in the startup years, that most of the cost is going to be incurred by the provinces,” Saskatchewan Finance Minister Donna Harpauer said.
The federal share of tax revenue will be capped at $100 million annually. Estimates for marijuana tax revenue reach up to $400 million, according to Morneau.
This deal will be in place for the next two years. After that, it will be renegotiated.
“We’re going to come back together in December 2018 to look at how the market’s working and how the federal government, the provinces, municipalities, are dealing with this change, and of course we’ll stay very much on top of this,” Morneau said.
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“But after two years, it’s time to rethink the approach to make sure we’re getting everything right.”
As for what this split means for Saskatchewan, Harpauer said the potential impact of the balance sheet is unknown.
“It’s uncharted territory, so that becomes part of the challenges that the provinces are having. We don’t know what our revenues will be nor do we know our total costs,” she explained.
The various provincial ministries are still tabulating associated costs of marijuana legalization. Harpauer added that it remains to be seen how much of the federal government’s legalization budget will go to help with costs in areas like public health education.
Ottawa has budgeted $1 billion over five years for legalization costs.
Additionally, the finance ministers agreed to keep taxation relatively consistent. Ottawa has already announced a 10 per cent tax on marijuana, or one dollar per gram.
Economics associate professor at the University of Regina, Jason Childs said this doesn’t leave much room for additional taxation outside of basic sales tax.
“The further the price gets above the black market price or the illegal price, the less activity we’re going to see in the legal market and it’s self-defeating,” he said.
“Remember the objective here is to keep this out of the hands of youths.”
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