Legal Marijuana Could Make Money for Governments, PBO Report Finds

Article by Ian MacLeod, Ottawa Citizen

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Legal recreational marijuana sales could begin as soon as January 2018 and generate hundreds of millions in preliminary revenue for governments, says a new report by the parliamentary budget officer.

Given an average legal price of $6 to $15 per gram and an average illicit price of $5 to $10, the PBO projects total cannabis market spending at $4.2 billion to $6.2 billion for 2018.

Sales tax revenues from that would be an estimated $618 million, with low and high estimates of $356 million and $959 million. About 60 per cent of the revenues from sales taxes would be expected to go to provincial governments. If the federal government also applies excise to legal marijuana, and the federal-provincial revenue sharing model is similar to that for tobacco, the provinces will collect most of those additional revenues as well.

At the outset of legalization, however, governments will have little room to impose taxes without raising the price of legal cannabis significantly above the illegal market price, says the report, released Tuesday.

And with the legal market share inversely correlated to cannabis revenues for the illicit market, that could pose an early hurdle for one of the key objectives of the federal strategy — reducing profits for organized crime.

Read full article here.

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