Trudeau proposes excise tax on legal marijuana sales

According to a proposal, each gram of pot would be subject to a tax of $1 on sales up to $10

A protester lights a joint during a 4-20 marijuana rally on Parliament Hill in Ottawa on Friday, April 20, 2012. (Sean Kilpatrick/CP)

OTTAWA – Prime Minister Justin Trudeau is proposing to levy a federal excise tax on recreational marijuana once it becomes legal next July, with the provinces and territories receiving half the revenue.

Under a federal proposal put to premiers during a first ministers meeting Tuesday, each gram of pot would be subject to an excise tax of $1 on sales up to $10 and a 10 per cent tax on sales of more than $10.

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However, premiers argued that provinces will foot the lion’s share of the cost of regulating and enforcing the new regime and should, therefore, get the lion’s share of the revenue.

Trudeau said the level of taxation on marijuana and revenue sharing are still matters under negotiation with the provinces. He acknowledged that there will be “significant new costs” associated with legalizing pot and said he’s open to provincial arguments that they’ll bear the brunt of them.

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Still, he emphasized that the goal of legalization is not to make money.

“Our goal from the very beginning on the legalization and regulation of marijuana was not to make profits, to bring in tax revenue,” Trudeau told a wrap-up news conference following a day-long meeting with provincial and territorial leaders.

Rather, he said, “all first ministers are fully aligned” on the goal of keeping marijuana out of the hands of kids and out of the control of criminal gangs.

Ontario Premier Kathleen Wynne said it’s not simply a matter of sharing any federal tax revenue with provinces. She noted that a number of municipalities have told her they will face some new costs as well.

Any taxes imposed on marijuana will have to be sufficiently low to keep the price low enough to force the black market out of business, said Nova Scotia Premier Stephen McNeil.

Consequently, he said: “I don’t think we should run out and start spending tax dollars based on cannabis.”

No one should think legalization means governments will “hit the mother lode,” agreed Quebec Premier Philippe Couillard.

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He argued that pricing of marijuana will be a balancing act: if it’s priced too low it will encourage use; if it’s priced too high, it will keep the black market thriving.

Manitoba Premier Brian Pallister, who wants the federal government to give the provinces another year to introduce regulatory and enforcement regimes, said discussion of revenue sharing is premature.

“It reminds me a little bit of the two salesman who were having a vicious argument about a commission split on a deal that they hadn’t done yet,” he said.

“We don’t really know what the ramifications are of this. This is a historic change … We’re talking about splitting revenue at this point we don’t know what the net may be. We may be splitting a cost, not a net proceed. We don’t know.”