Pubdate: Mon, 19 Jun 2017
Source: Globe and Mail (Canada)
Copyright: 2017 The Globe and Mail Company
Contact:  http://www.theglobeandmail.com/
Details: http://www.mapinc.org/media/168
Author: Barrie McKenna
Page: A4

MORNEAU PUSHES FOR LOW TAXES ON LEGALIZED CANNABIS

Ottawa is seeking a pledge from the provinces that they will keep
marijuana taxes low after legalization to help drive criminals and
black-market dealers out of business.

Finance Minister Bill Morneau intends to push for a low-tax commitment
from his provincial counterparts in meetings Sunday and Monday in Ottawa.

"Our government's goals are clear: we want to keep criminal elements
out, and we want to keep cannabis out of the hands of children." Mr.
Morneau said in a statement. "This will mean keeping taxes low and
working together on an ongoing basis to ensure a co-ordinated approach."

Ottawa is worried that millions of Canadians will continue buying on
the black market if taxes trigger a jump in the price of recreational
marijuana, which is set to become legal in July, 2018, under federal
legislation tabled earlier this year.

Mr. Morneau wants broad agreement among his provincial counterparts on
the principle of keeping taxes low and co-ordinating marijuana
policies across the country, according to a federal Finance source. He
also intends to present proposals to the province on what he sees as
the most effective way to tax cannabis, including how to handle online
sales.

One of the key reasons for legalizing the product is to shut criminals
and gangs out of the lucrative trade.

But federal officials acknowledge that the combination of excessive
taxation and inadequate supply of marijuana from authorized vendors
could play into the hands of illegal dealers, creating a gaping hole
in legal sales.

Meanwhile, some provinces see legalization as a way to create a new -
and taxable - industry.

The Parliamentary Budget Officer has estimated Ottawa and the
provinces could generate sales taxes of anywhere from $356-million to
$959-million in the first year of legalization. The estimate is based
on projected annual consumption of 655 metric tons of cannabis in 2018
and the assumption that Ottawa and the provinces will tax marijuana as
they do most other goods - at the average national sales tax rate of
12.1 per cent - according to a report released last year.

Finding the ideal price-point won't be easy. The PBO warned that
black-market dealers would keep two-thirds or more of all sales if
legal marijuana winds up being $5 a gram pricier than marijuana on the
street ($15 versus $10 a gram).

The impact of high taxes on cigarettes and alcohol has been a chronic
challenge for governments in Canada. Consumers have a greater
incentive to buy these products on the black market when there is a
substantial gap between pretax and after-tax prices.

Several provinces, including Quebec and Alberta, have expressed
concerns that the extra revenue from marijuana sales won't cover costs
associated with legalization, including enforcement, education,
addiction treatment and distribution problems. Some want Ottawa to
share its tax take.

Federal Health Minister Jane Philpott has pledged to spend more on
cannabis-related programs.

Federal and provincial officials have been working behind the scenes
in recent months on the details of what the legal market will look
like, including tax levels. Details on the structure and level of
taxes are at an early stage, according to a federal source. The
meeting in Ottawa is the first opportunity for Mr. Morneau to talk
face-to-face with provincial finance ministers, the source added.

Ontario Finance Minister Charles Sousa says he too wants an approach
to selling cannabis that is "fair and collaborative," said spokeswoman
Jessica Martin.

"We remain committed to developing a balanced framework that is
focused on protecting youth, maximizing public health and road safety,
and reducing harm," Ms. Martin said.

Quebec Finance Minister Carlos Leitao likewise insisted he's eager to
reach a consensus with Ottawa and the other provinces on taxing
cannabis. "I think the objective is to get to a consensus amongst the
provinces and the federal government as to what is it that we think
that we should be doing," Mr. Leitao told The Canadian Press.

Also on the finance ministers' official agenda is a review of the
state of Canada-U.S. relations as the countries prepare to renegotiate
the North American free-trade agreement with Mexico, as well as gaps
in so-called "beneficial ownership" rules for private companies and
trusts. Canada is among the laxest Group of 20 countries when it comes
to disclosure of the real owners of trusts and corporations,
inhibiting efforts to crack down on money laundering and tax evasion,
according to Transparency International Canada. Roughly nine of 10
companies are registered at the provincial level and rules often vary
widely between jurisdictions.

Bank of Canada Governor Stephen Poloz is also slated to give finance
ministers an overview of the suddenly resurgent Canadian economy.
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MAP posted-by: Matt