Canada’s fed-prov finance ministers to start deep dive on marijuana taxation

As the country’s finance ministers meet in Ottawa, the Trudeau government should expect to hear concerns about the added burden marijuana legalization could heap onto provincial shoulders.

The agenda for the two-day, federal-provincial-territorial gathering, which starts Sunday, will include discussions on how best to apply taxes on a regulated market for cannabis.

The federal government introduced legislation in April with a goal of legalizing and regulating the use of recreational marijuana by July 2018.

Pot taxation is expected to stay low to ensure the regulated market elbows out illegal dealers.

Details, however, on how the tax revenues will be shared between provinces and Ottawa have yet to be determined.

The ministers are scheduled to start working on a “co-ordinated approach to the taxation of cannabis,” says a news release from the office of federal Finance Minister Bill Morneau, who hosts the twice-yearly meetings.

Taxation is poised to emerge as a key focal point of Canada’s pot-legalization process.

Since the federal legislation was tabled, several provinces have voiced concerns about how much work will fall within their jurisdictions — from addiction treatment, to distribution, to policing.

For example, Alberta Premier Rachel Notley has warned that provinces will be left with a lot of the “heavy lifting” related to pot legalization, including considerable costs.

In Quebec, Public Health Minister Lucie Charlebois has expressed doubts the tax revenue generated by recreational pot will cover the price tag of preparing for regulation, particularly when it comes to health, security and education efforts.

Ontario Finance Minister Charles Sousa said in an interview he is not apprehensive about cannabis legalization, he just wants to ensure the transition into regulated markets doesn’t impose any extra costs on provinces.

“There’s going to be a lot of requirements on behalf of the provinces,” said Sousa.

“We want to make sure that the proper sharing is there and enough is supported for the implementation of cannabis and the protection (of) our society as we proceed.”

Sousa said he will also be keen to hear how his counterparts are approaching legalization.

Federal Health Minister Jane Philpott has promised to work with provinces and to commit more resources to cannabis-related needs like public security, policing and educational campaigns.

Philpott’s office has also argued that the current system of prohibition is very expensive and legalization could significantly lower the provinces’ existing costs.

The trick for Canada’s lawmakers will be finding the pricing sweet spot — high enough to cover costs, but cheap enough to squeeze out the illegal market.

The federal government has repeatedly stated its primary goals with legalization are to get weed out of the hands of young Canadians and prevent criminals from profiting from the drug.

In addition to cannabis, the finance ministers will also discuss how to improve information sharing between jurisdictions as a way to address tax avoidance, tax evasion, money laundering and terrorist financing.

They will also focus on the Canada-U.S. trade relationship.

For Quebec Finance Minister Carlos Leitao, the discussions on Canada-U.S. trade, including renegotiation of the North American free trade agreement, will be perhaps the most important issue on the agenda.

“I think the objective is to get to a consensus amongst the provinces and the federal government as to what is it that we think that we should be doing, both in terms of the taxation of cannabis and in terms of our relationship with the United States,” Leitao said in an interview.

Bank of Canada governor Stephen Poloz will be on hand to deliver a presentation on the state of the economy.

Sousa said he would also like to hear more about the state of the federal government’s infrastructure plan, including its proposed, $35-billion infrastructure bank.

The bank is designed to use public funds as leverage to attract billions more in private investment for large projects.

Senators have been debating whether to split legislative provisions related to the creation of the bank from the government’s budget implementation bill.