Municipalities seek 40 per cent of tax revenue from legal marijuana

Thestar.com
September 7, 2018
Jonathan Hayward

Mayors across British Columbia want the province to hand over at least 40 per cent of cannabis revenues to help municipalities pay for the expenses of accommodating legal marijuana sales when they begin next month.

The sharing arrangement suggested by the Union of BC Municipalities would be similar to how Ontario has said it will divvy up provincial profits from legal cannabis. The proposal will be voted on by mayors of B.C.'s towns and cities at the annual UBCM conference next week.

Vancouver Councillor Kerry Jang, co-chair of a provincial-municipal cannabis committee, said the proposal – which includes a payment of $25-million up front to local governments – was based on helping communities recover the estimated $50-million total they will need to help end nearly a century of cannabis prohibition.

"[The Federation of Canadian Municipalities] actually suggested 50 per cent, but looking at the actual dollar amounts, it ended up being around 40," said Mr. Jang, who pushed to create Vancouver's cannabis-shop regulations, passed in 2015.

B.C. is expecting legalized cannabis to bring in $75-million a year from its share of the federal excise tax, with legal sales estimated to be worth $1-billion in the province.

The 40-60 split would only apply to projected provincial excise-tax revenue of $125-million over the first two fiscal years of legalization. Any revenue above that total should then be split in half between the province and its municipalities, the proposal states, with every community receiving at least $10,000 regardless of its population.

Mr. Jang said he expected the UBCM will adopt the position and an agreement with the province will soon be reached. A spokesperson for the provincial Finance Minister did not respond to a request for comment on the proposal Thursday.

A little more than a month away from legalization, Ontario and Quebec are the only provinces that have announced how they plan to share their cannabis revenues with communities.

Ontario, which recently ditched public storefront sales in favour of private retailers, has agreed to give cities $40-million in cannabis excise-tax revenue over the first two years, or about 40 per cent of the projected revenue of $100-million.

Quebec will give its local governments $20-million of its projected $73-million revenue – roughly 27 per cent – from the first two years of its cannabis excise tax and it will also commit another $42-million toward public-safety efforts across the province.

After the first two years of legalization, the UBCM wants to review this revenue-sharing agreement and determine whether to stick with it or scrap it in favour of increasing the provincial sales tax on cannabis products to up to 10 per cent from the existing 7 per cent. If that happened, then local governments would cease getting revenue from the excise tax and negotiate with the province as to how much of the provincial sales tax would flow into their coffers, according to Mr. Jang.

“We’re trying to keep the price low enough so people will stay with legal pot as opposed to going to black-market sources, which could be cheaper," Mr. Jang said of the approach. "That was for us the reason why we said ‘let’s look at that maybe two years from now, as opposed to up front.’”

Mr. Jang added that those communities that want to opt out of the retail sale of cannabis, such as Richmond, will still get the same amount of revenue from the UBCM proposal.

"Whether or not there's a pot shop, it should be like health care: you may buy your cigarettes in Vancouver, but come down with cancer in Burnaby," he said.