BC and Ottawa sign marijuana tax-sharing deal

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B.C. has signed on to Ottawa’s tax for legalized marijuana, though the province has not yet decided whether to share the money with local communities.

Finance Minister Carole James signed the “coordinated cannabis taxation agreement” with the federal government late last week, formalizing Ottawa’s offer to share 75 per cent of pot revenue with provinces and territories. The federal government had originally proposed a 50-50 split, but caved in December to pressure from provinces that argued they deserved a richer cut of the pending cash stream.

“I’m proud of the federal excise tax agreement for cannabis that British Columbia helped negotiate,” James said in a statement Tuesday. “The agreement ensures that 75 per cent of the excise tax revenue will come to the province, and the federal government’s revenue is capped at $100 million. The revenues outlined in this agreement will help us manage our priorities for British Columbians.”

The B.C. government signed Friday, the day after it introduced three bills into the legislature that will set provincial cannabis sales licenses, a government distribution model and a system of both public and private cannabis stores.

However, much still remains unknown about legal marijuana.

The exact date it will be legal to consume had been set by Ottawa for July 1 but is now widely expected to be delayed until later in the summer.

B.C. has not decided whether it will charge the seven per cent Provincial Sales Tax on marijuana sales, to generate even more revenue. Nor has the province decided how much, if any, of the federal-provincial revenue deal to share with local communities. Municipalities are eager for their own slice of revenue to recover costs related to local policing, among other expenses.

February’s B.C. budget forecast $50 million in cannabis revenue for the partial year of 2018/19, rising to $75 million in future years. But that will depend on how much the public buys. 

The tax is set at $1 per gram, or 10 per cent of the final producer’s selling price, whichever is higher. That means roughly 25 cents per gram of cannabis will go to Ottawa and 75 cents to B.C. Ottawa’s maximum take is set at $100 million annually, with any additional revenue split by the provinces.

The tax is an excise tax paid by manufacturers, and applies to flowers, seeds, seedlings and other cannabis products.

Ottawa and the provinces have struck a cannabis taxation policy committee to review the rates and effectiveness of the deal before Jan. 1, 2020.

“Now, we’re waiting for the federal government to sign the agreement as well to make it final,” said James. “Of course, it won’t take effect until after Federal Bill C-45 is passed and comes into force.”

Solicitor General Mike Farnworth has said that while B.C. has yet to set a purchase price for marijuana, the province is aware it has to have a competitive rate to avoid driving purchasers back to a cheaper black market. The deal between B.C. and Ottawa stipulates that “the parties agree that margins and markups shall be reasonable and shall only be applied to cover operating costs and capital expenditures and to generate a normal rate of return comparable to what would be expected in the private sector.”

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