No tax high for le­gal Cana­dian cannabis

The Myanmar Times - - International Business -

CANADA will have lit­tle wig­gle room to tax recre­ational mar­i­juana sales when it moves to le­galise the drug, a re­port to par­lia­ment said.

One of the key ra­tio­nales cited by sup­port­ers for end­ing the pro­hi­bi­tion on pot has been the bounty of tax rev­enues le­gal­i­sa­tion would bring.

But par­lia­men­tary bud­get of­fi­cer Jean-De­nis Frechette, tasked with pro­vid­ing anal­y­sis to law­mak­ers, warned it would not be a bo­nanza.

Re­tail sales taxes are ex­pected to be rel­a­tively mod­est at the start – about C$300 mil­lion to C$600 mil­lion (US$224 mil­lion to US$448 mil­lion) and not bil­lions, he said.

That is far be­low the an­nual fu­ture cannabis tax rev­enue of up to C$5 bil­lion es­ti­mated by CIBC World Mar­kets in Jan­uary.

Also, tax pol­icy de­ci­sions will re­quire trade-offs be­tween the govern­ment’s two main ob­jec­tives: dis­cour­ag­ing con­sump­tion among Cana­dian youths and re­duc­ing the profits in the il­licit cannabis mar­ket.

“The govern­ment will have lit­tle fis­cal space to ap­ply tax with­out push­ing the price of le­gal cannabis sig­nif­i­cantly above the il­le­gal mar­ket price,” Mr Frechette said.

He said higher cannabis prices will dis­cour­age con­sump­tion, es­pe­cially among young Cana­di­ans who are likely to be more sen­si­tive to price.

But higher le­gal cannabis prices pro­vide a dis­in­cen­tive for cur­rent users to trans­fer to the le­gal mar­ket.

The av­er­age price of il­licit cannabis this year ranged be­tween C$8.32 and C$9.36 per gram. The pre-tax price of le­gal cannabis is pro­jected at be­tween C$6.67 and C$8.33.

Canada will be­come only the sec­ond coun­try to fully le­galise recre­ational cannabis, af­ter Uruguay, with le­gal­i­sa­tion seen next year or in early 2018. –

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