Liberals reach deal with the provinces on sharing pot tax revenue, with price pegged at about $10 a gram

Finance Minister Bill Morneau has worked out a deal on sharing pot tax revenues with the provinces, and says legal marijuana will be competitively priced at about $10 a gram to shut down the black market.

Agreement gives provinces 75% of tax revenues from legal cannabis sales, caps federal share at $100M

Federal Finance Minister Bill Morneau holds a news conference after meeting with his provincial counterparts in Ottawa on Monday. (Adrian Wyld/Canadian Press)

Finance Minister Bill Morneau has worked out a deal on sharing pot tax revenues, and says marijuana will be competitively priced at about $10 a gram to shut down the black market.

An agreement announced Monday gives the provinces and territories 75 cents of every dollar collected in excise tax levied on cannabis for the first two years. That's a significant increase from the 50-50 split the federal government had proposed last month.

'The federal government did not give in on this,' says Liberal MP Bill Blair. 8:01

Under the deal reached during a meeting in Ottawa with Morneau and his provincial and territorial counterparts, the federal portion of tax revenues will be capped at $100 million a year. That figure is based on a projected $400 million a year in total tax revenue, with any dollars collected above and beyond that shared by the provinces.

"After two years, it's time to rethink the approach to make sure we're getting it right," Morneau said.

Finance ministers agreed on a plan to keep the price low to drive out the illegal black market and move to a legal, regulated one. With one dollar, or 10 per cent taxation per gram, the expectation is that legal marijuana will be priced at about $10 a gram with all taxes included.

Startup costs for implementing the regulated regime will be shared by all levels of government for public health and safety, and Morneau projects that the federal government will spend at least $700 million over several years to try to get the legal program off to a strong start.

Ontario Finance Minister Charles Sousa said there is already a large demand for illicit cannabis, and he expects the legal market will grow "substantively" after the first few years. But the primary focus right now is not on generating revenue, but on recovering costs for the required upfront investments to set up distribution networks and public health and safety measures.

"We want to take the appropriate measures now to combat the illicit market, get it out of the system, then go forward to see how we can deal with revenue," he said. 

Quebec Finance Minister Carlos Leitão said his province will likely take in about $60 million in tax revenue annually, but that will not cover the expected costs of implementing the program.

Ontario Finance Minister Charles Sousa said he expects the market for legal marijuana will grow 'substantively' after the first few years. (Sean Kilpatrick/The Canadian Press)

'Getting the balance right'

Heading into the meeting with Morneau in Ottawa, provincial ministers had insisted on a greater portion of tax revenues because the provinces and municipalities will shoulder the majority of costs for police enforcement, health care and education programs once marijuana becomes legal in July.

Asked about the deal this afternoon, Prime Minister Justin Trudeau repeated that the objective is to restrict access to young people and to remove profits from criminals.

"That means getting the balance right in terms of both pricing and the ability to properly monitor it in our communities," he said.

Manitoba Finance Minister Cameron Friesen said the provinces are assuming the bulk of costs, risks and responsibilities, from roadside testing and police training to dealing with mental health issues.

"We've never seen this through the lens of revenue generation. For Manitoba, the focus has always been on safety," he said. "This is a federal policy on a federal time line."

B.C. Minister of Finance Carole James weighs in on the cannabis tax revenue sharing deal. 8:46

Morneau said the finance ministers also made strides in other areas, including a commitment to ensuring authorities know who owns which corporations in Canada and to harmonize corporate record requirements between jurisdictions, and to strengthen the Canada Pension Plan for parents who lose income due to the birth or adoption of a child, and those with disabilities or spouses who are widowed at a young age.

Morneau, centre, meets with his provincial and territorial counterparts on Parliament Hill in Ottawa. (Sean Kilpatrick/Canadian Press)

Corrections

  • This story has been updated to say the government will spend at least $700 million over several years to try to get the legal program off to a strong start. An earlier version incorrectly stated the figure was $700 million a year.
    Dec 19, 2017 1:36 PM ET