Provinces to get 75% of take on pot taxes
Total revenues could reach $1B per year
• The federal government has agreed to give the provinces and territories a 75-per-cent share of the tax revenues from the sale of legalized marijuana, a portion of which will go to cities and towns to help them defray the cost of making pot legal across Canada.
Finance Minister Bill Morneau announced the two-year agreement Monday after a day-long meeting with his provincial and territorial counterparts.
Morneau says Ottawa will retain the remaining 25 per cent share to a maximum of $100 million a year, with any balance over that limit going to the provinces and territories.
The larger share, he added, will allow the provinces to “fairly deal with their costs and so they can work with municipalities,” which had been asking for at least a onethird portion of the revenue to help ease the burden of costs like law enforcement.
Morneau said that over the first two years, the federal government expects legalized pot to generate only about $400 million in tax revenues, adding that the ministers are scheduled to gather again a year from now to assess how the framework is working.
“Our expectation is that by keeping prices low, we will be able to get rid of the black market. However, that will happen over time,” Morneau said.
“Our estimates suggest that the size of the taxation revenue is roughly … about up to $400 million for the first couple of years. What we’ve agreed at our table today is that we need to come back together; we’re going to come back together in December 2018 to look at how the market’s working, and how the federal government, provinces and municipalities are dealing with this change.
“Of course, we’ll stay very much on top of this, but after two years it’s time to rethink the approach to make sure we’re getting it right.”
The original model put forward by the federal government proposed an even 50-50 split, a plan immediately shot down by the provinces, many of which wondered aloud what sort of costs Ottawa would be incurring to deserve such a share.
Earlier Monday, Ontario Finance Minister Charles Sousa said the federal Liberal government had made the case that it, too, would have costs, but was showing flexibility on related revenue and cost-sharing questions.
Ottawa’s initial estimates suggested the total pot of tax revenue from marijuana sales could eventually reach $1 billion per year.
“If there is a markup that a respective province wants to do, it would be outside of that taxation model, so that was the flexibility that we as a province were looking for and I would say indeed it was what we were hearing across the country,” Nova Scotia Premier Stephen McNeil said.
“The two-year window will give each of us the time to go back to the table and say this is actually what policing is costing and this is what the education component is.”
The Federation of Canadian Municipalities has said it wants a third of the revenues earmarked to help municipal governments handle administrative and policing costs, but how that share of the pot is divvied up will be up to the municipalities and their provincial or territorial counterparts.
The federal government has already committed more than $1 billion over five years towards pot legalization in areas like policing and border security.
When asked about the federal push to ensure enough money goes to cities and towns, Quebec Finance Minister Carlos Leitao said each province will do it their own way.
“Of course, the provinces will work with their municipalities, but it’s for us to decide what that percentage will be,” he said.
The ministers also discussed the federal government’s proposed tweaks to the formula behind equalization payments, as well as the three-year review of the Canada Pension Plan.
They also explored the state of the global economy and heard a presentation from Bank of Canada governor Stephen Poloz.
Talks also took place on a national strategy to improve the sharing of information on corporate ownership between jurisdictions, a measure designed to clamp down on tax avoidance, tax evasion, money laundering and terrorist financing.
“We agreed to take concrete steps to make sure that we had knowledge of who owns companies across our country so that we can do a better job at ensuring that we don’t have tax evasion, that we don’t have money laundering, that we don’t have terrorist financing in any part of our country,” Morneau said.