Canada’s federal government has agreed to give provinces and territories 75 percent of the revenue collected from taxing cannabis sales once the product becomes legal in the summer of 2018.
Finance minister Bill Morneau announced the deal on Monday afternoon following a meeting with his provincial and territorial counterparts, backtracking on the federal government’s original proposal for a 50-50 revenue split for the first two years of legalization.
The provinces argue that they should receive more of the tax revenue because they will be responsible for increased policing costs and other bills associated with the nascent cannabis industry.
Ottawa’s portion of the marijuana tax revenues will be capped at $100 million a year, with the provinces and territories getting the rest, Morneau said. The deal will last for two years, at which point it’ll be reviewed.
“After two years, it’s important to rethink the approach to make sure we’re getting it right,” Morneau said in a news conference Monday.
That 50-50 split proposal was rejected by provincial ministers who argued that provinces and municipalities are the ones that will shoulder the responsibility of policing, health care and education programs surrounding legalization.
The provincial pushback included a unsuccessful proposal from the Manitoba government demanding that all tax revenue from cannabis sales go to the provinces.
Ottawa and the provinces have also agreed to stick to the previously proposed tax of $1 per gram or 10 percent of the final retail price — whichever is higher. The Ontario government plans to price legal weed at $10 a gram, CBC reported in September.
Total tax revenues from cannabis sales are expected to reach $400 million in the first two years after legalization, said Morneau.
“Our expectation is that by keeping prices low, we will be able to get rid of the black market. However, that will happen over time,” the finance minister told reporters.