Pot-tax fight expected
PROVINCES, FEDS TO SQUARE OFF OVER TAX PROCEEDS OF LEGALIZED MARIJUANA
A cross-country squabble over how best to divvy up the proceeds of Canada’s coming legal-weed windfall is about to intensify as finance ministers gather for high-stakes talks in Ottawa.
For the provinces and territories, a key question looms: what entitles Ottawa to claim so much as half of the tax revenues that will start flowing when marijuana is legalized next summer?
The provincial and territorial governments insist they should get the lion’s share of the funds because they’ll shoulder most — if not all — of the costs associated with legalization.
But federal Finance Minister Bill Morneau will counter with an argument during the meetings that Ottawa has already made big financial commitments towards pot legalization, said a senior government official.
Morneau will explain that he’s already earmarked more than $1 billion toward legalization over the next five years, with a focus on areas such as public safety, policing and awareness, said the official, who spoke on condition of anonymity because they were not authorized to speak publicly.
Nearly $700 million of that commitment was outlined in Morneau’s recent fall economic update.
“We’ve identified significant funds that we are going to put forward in that regard,” Morneau said on Sunday as he headed to a working dinner with his provincial and territorial counterparts.
“We need to cover our costs — they’re legitimate.”
At the same time, Morneau added that it’s important to consider how municipalities and provinces will cover the costs required.
Negotiations will be centred on the federal Liberal government’s proposal to impose a cannabis excise tax of $1 per gram or 10 per cent of the final retail price, whichever is higher.
It’s expected to bring in as much as $1 billion per year. Ottawa has long insisted its legalization plans were never about the money, but about keeping pot away from kids.
An initial federal offer of a 50-50 split with the provinces was met with equal parts disdain and incredulity.
The federal government has since said it’s prepared to go further — as long as some of that extra cash goes to cities. The Federation of Canadian Municipalities wants a third of the revenues earmarked to help municipal governments handle administrative and policing costs.