Katelyn Baker
Well-Known Member
Ottawa - 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.
"Unless the average legal price is less than or equal to the illicit price, the illicit market will likely capture at least part of the total market," says the report. "When the average legal price is less than or equal to the average illicit price, almost all consumption (98 per cent) is projected to shift to the legal market in 2018.
"However, as the legal price increases above that of the illicit price, the market share of legal cannabis progressively decreases. One, two and three dollar legal price premia are associated with declining estimated legal market shares of about 65, 56, and 42 per cent respectively."
But lowering the legal price would make the drug more available to young consumers, the report warns, something which Ottawa hopes to discourage via legalization.
PBO research suggests that if the average legal price is lower than or equal to the average illicit price, illicit market revenues are expected to be in the $100-million range. But if legal cannabis were to cost an average of $15 per gram, illicit market revenues would be projected to approach $4 billion.
As the legal marijuana market matures, the PBO says the potential for governments to collect more revenue will grow. Production costs for the legal industry are expected to decline, it says, creating space for government to collect a portion of the cost savings without increasing the legal retail price.
"Further, a potential consumer shift to more value-added cannabis products could create a larger tax base. Finally, as the legal market becomes more entrenched, more Canadians may opt into the legal market, resulting in higher revenues."
The Liberal government is expected to introduce its legalization legislation next spring. The PBO says its estimate of a January 2018 start for legal sales is based on discussions with industry stakeholders.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: Legal Marijuana Could Be A Gold Mine For Governments, PBO Report Finds
Author: Ian MacLeod
Contact: 416-383-2300
Photo Credit: Brian Thompson
Website: National Post
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.
"Unless the average legal price is less than or equal to the illicit price, the illicit market will likely capture at least part of the total market," says the report. "When the average legal price is less than or equal to the average illicit price, almost all consumption (98 per cent) is projected to shift to the legal market in 2018.
"However, as the legal price increases above that of the illicit price, the market share of legal cannabis progressively decreases. One, two and three dollar legal price premia are associated with declining estimated legal market shares of about 65, 56, and 42 per cent respectively."
But lowering the legal price would make the drug more available to young consumers, the report warns, something which Ottawa hopes to discourage via legalization.
PBO research suggests that if the average legal price is lower than or equal to the average illicit price, illicit market revenues are expected to be in the $100-million range. But if legal cannabis were to cost an average of $15 per gram, illicit market revenues would be projected to approach $4 billion.
As the legal marijuana market matures, the PBO says the potential for governments to collect more revenue will grow. Production costs for the legal industry are expected to decline, it says, creating space for government to collect a portion of the cost savings without increasing the legal retail price.
"Further, a potential consumer shift to more value-added cannabis products could create a larger tax base. Finally, as the legal market becomes more entrenched, more Canadians may opt into the legal market, resulting in higher revenues."
The Liberal government is expected to introduce its legalization legislation next spring. The PBO says its estimate of a January 2018 start for legal sales is based on discussions with industry stakeholders.
News Moderator: Katelyn Baker 420 MAGAZINE ®
Full Article: Legal Marijuana Could Be A Gold Mine For Governments, PBO Report Finds
Author: Ian MacLeod
Contact: 416-383-2300
Photo Credit: Brian Thompson
Website: National Post
