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Provinces getting big slice of cannabis tax pie

Posted on December 20, 2017 by Taber Times

By Trevor Busch
Taber Times

With the provinces and municipalities lobbying hard for a fair slice of the upcoming cannabis tax pie in a legalized environment, the Trudeau Liberals have acceded to their demands reaching a deal that will see 75 per cent of revenues forked over to the provinces.

“The funding change has gone from a 50-50 to a 75-25,” said Bow River MP Martin Shields. “There’s a lot of concern of how that money might come down to municipalities. That’s a critical piece, because the feds are making arrangements with the provinces, and from my point of view, and for our municipalities, we hope that there’s money that does come down to the municipal level. They’re determined to pass this thing.”

In an effort to erode the black market, it is expected marijuana will be competitively priced at around $10 per gram. The agreement reached last week will give the provinces and territories 75 cents of every dollar collected in excise tax levied on cannabis for the first two years. The federal portion of tax revenues will be capped at $100 million a year based on a projected $400 million a year in total tax revenue.

“I think there’s a big number of money coming, and so they know there’s a large amount of money on the table, and they didn’t want to look like they were just using this as a tax grab which it could have been at 50-50,” continued Shields. “There’s been rumoured to be as much as a billion dollars in the next year or two on the table out of taxes depending on how people price it. And I don’t think they want to see themselves as just doing this as a tax grab, because that’s not what they said they would to be doing.”

While still expressing his continued opposition to cannabis legalization, Cardston-Taber-Warner MLA Grant Hunter argued the federal government should be handing over all the eventual tax revenues associated with legalization to the provinces and municipalities, not just 75 per cent.

“I’ve been very clear about this. I’m adamantly opposed, but it’s a federal issue,” said Hunter. “I don’t know what kind of viability or cost the federal government is incurring because of bringing this legislation down, but I’m not sure why we didn’t get 100 per cent. I know that when they negotiated that the cap would be the feds can have $100 million. I guess that’s okay, but why they’re getting 25 per cent, I don’t understand that because municipalities are going to be bearing the brunt of the cost.”

Bill C-45, the Cannabis Act, was recently passed by the House of Commons and is now under review in the Senate. The legislation calls for marijuana legalization to come into effect in roughly six months, and sets a date of July 1, something Shields and his caucus colleagues have objected to.

“One of the things I’ve talked about is the timing, the timing, the timing, in the sense of how quickly they want to do it,” said Shields. “I understand they have a majority, but on the other hand there’s some things they should change. They’ve got it through the House in one form, it’s now sitting before the Senate. What the Senate might do for amendments we don’t know, but it’s coming quickly. Another point that I have — and a lot of us do — is declaring this legal on July 1, our national holiday, so it becomes ‘Marijuana Day.’ That just bothers a lot of us, the push to have it legal on that day. It doesn’t make sense to a lot of us.”

While maintaining from the outset that cannabis legalization is designed to restrict access for young people and to remove profits from criminals, the federal government had been assailed in the lead up by the provinces and municipalities who argued they will shoulder the majority of costs for police enforcement, health care and education programs.

“I think the provinces and the municipalities have been very successful at lobbying hard to say it’s one thing for you guys to pass this, but when the rubber hits the road it’s going to be the provinces and down to the municipalities that have to deal with it,” said Shields. “So I think the provinces and the municipalities have been very effective lobbying this, and I don’t think the federal government wanted to be seen as the Grinch with all the money, and then they pass it and all the provinces have to fund it somewhere else through different levels of government.”

Municipal politicians now need to re-direct their negotiating efforts to their provincial governments if they hope to secure a fair percentage of that 75 per cent of tax revenues, according to Hunter.

“We need to make sure that the province is going to start talking about how that cost is going to be shared down. Now that they’re getting 75 per cent, how much of that is going to trickle down to municipalities? The extra policing, the social costs, all of that has to be borne at the municipal level. They negotiated hard, they got that 75 per cent versus 50 per cent, but I think now it’s incumbent upon our mayors and reeves to negotiate hard to get as much of that money as they can, because they’re going to be bearing the cost.”

In the Taber area, local municipalities have seen varying success recently in their efforts to lobby the provincial and federal governments to reform or repeal Bill C-45.

In mid-November, the Town of Taber’s resolution at the Alberta Urban Municipalities Association annual conference — which would have called on that organization to lobby the provincial and federal governments to repeal legalization — was staunchly defeated by a margin of 76 per cent to 24 per cent. Taber’s motion had been seconded and supported by the Town of Vauxhall.

Just days before, a more watered-down resolution sponsored by the Municipal District of Taber at the Alberta Association of Municipal Districts and Counties’ annual conference was successfully passed by the membership by a margin of 68 per cent to 32 per cent. The M.D.’s motion, however, had largely focused on efforts targeting slowing down the legalization process rather than advocating to fully repeal Bill C-45.

“I know that municipalities across the country have been very strong, your big city mayors — the closest big city mayor that we hear of is (Naheed) Nenshi in Calgary — the big city mayors of the large cities have been very loud and active in saying that we need money at the municipal level. They’re a very effective group, as they make up the 15 largest cities in the country. From the largest group, the FCN (Federation of Canadian Municipalities) that represents all the municipalities, in working with the provinces, there has been work done to say ‘how can you now work with us to implement this at the municipal level?’ There will be a lot of pressure on the provincial governments, and it will help that the percentage has been increased to the provinces, for them to be able to work with the municipalities. With that larger number, I think it will be easier for them to say how can we transition this in different ways,” said Shields.

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