Pot processors among agribiz firms eligible for new provincial tax break
Tax credit available for businesses that have spent at least $10 million to expand
Cannabis processors looking to set up in Saskatchewan could soon get a tax break from the government.
A new tax break — the Saskatchewan Value-Added Agriculture Incentive — is also available to other "value-added" agricultural businesses, like pea protein processors or malt producing operations.
Starting now, businesses can apply for the incentive which, according to a release, offers a "non-refundable, non-transferable 15 per cent tax credit on capital costs for newly-constructed or expanded value-added agriculture facilities."
According to Kirk Westgard, the assistant deputy minister of economic development, this means companies can write off a tax credit of up to 15 per cent of the cost of the new build for the next ten years, an offset on income tax.
"[It] creates opportunity to attract entrepreneurial talent and foreign direct investment into the province," Westgard said.
"We have been working with several companies who are looking at it and looking to make investments."
Westgard didn't tie the legalization of marijuana to this incentive but said the cannabis production facilities could apply for the credit.
In the news release, the government listed "cannabis oil facilities" as one example of a business that would qualify.
Businesses must have spent $10 million expanding within the last year to be eligible. So why give a tax break to what would have to be a very wealthy company?
Jason Childs, associate professor of economics at the University of Regina, said the proposal gives people an idea of the scale of projects the government is hoping to reel in.
If you're looking for short term bang for your buck, this kind of thing makes sense.- Jason Childs, University of Regina
"It's who's going to be able to exploit it and it tells you the scale of the project we're going to be talking about," he said.
"Big projects tend to have big, short-term impacts on GDP. So if you're looking for short term bang for your buck, this kind of thing makes sense."
Childs noted that giving breaks or subsidizing industries can either catapult them into success or backfire.
"It has worked elsewhere on occasion. It has also failed spectacularly on many occasions," he said.
"It's hard to know. You're gambling."
Childs noted that subsidizing can prove fruitless, depending on what other provinces decide to do.
"If everybody does it, then we've wasted our time," he said.
"This can devolve into a race to the bottom, a subsidy race."