Canada’s federal and provincial governments earned C$186 million (roughly $140 million) in tax revenues from direct sales of cannabis in the first 5-1/2 months of legalization.
According to a report by Statistics Canada (first reported on by Reuters), Ottawa collected a combined C$55 million in revenue via federal excise and goods and services taxes. Provincial tax revenues were estimated at a combined C$132 million. Although this is obviously a large number, the figures were below projections, said Robyn Gibbard, an economist for the Conference Board of Canada think tank, “thanks in part to the bumpy rollout of legalization last fall.” Gibbard says; “However, we think that as the kinks are worked out, governments can expect strong growth in revenues from cannabis sales going forward”.
Earlier this year, several Canadian provinces, including Ontario and British Columbia, cut their cannabis-revenue forecasts because of a slow start caused by supply shortages and higher prices compared with the black market. In Ontario, Canada’s most populous province, retail cannabis stores only opened at the beginning of April.
Government tax revenues from cannabis sales “may rise further in the second half of the year, as additional cannabis retail outlets are scheduled to open,” Statistics Canada said. Under Canada’s legalization framework, the federal government receives 25% of the excise tax revenue, with the remaining amount going to the province where any given sale occurs. Statistics Canada noted on Wednesday that general goods and services taxes on cannabis ranged between 5% and 15%, depending on the region. Excise taxes on cannabis are set at C$1 per gram or 10% of the pre-tax transaction, the agency said.
Canada’s parliament approved Bill C-45, known as the Cannabis Act, in June of last year, and it took effect in October. The measure created an overarching national regulatory framework and enabled each province to establish its own system of licensing and regulating marijuana businesses. Adults are allowed to possess up to 30 grams of marijuana, which they can purchase from a brick-and-mortar marijuana store, or online.
Canada is just the second country and the first G7 nation to legalize marijuana for adults at the national level. The first was Uruguay, where legislation was signed into law in December 2013 and a limited number of pharmacies began selling marijuana to adults in July 2017. 10 U.S. states, the District of Columbia, and one U.S. territory, the Northern Mariana Islands, have enacted laws making marijuana legal for adults 21 and older. Eight of those states and the Northern Marianas have also established systems for regulating commercial cultivation and sales.