OTTAWA — Marijuana hasn’t proven to be the cash crop the government expected, with cannabis excise tax revenues coming in at roughly half the original estimates.
In the first fiscal year that marijuana was legalized, 2018 – 2019, the government took in $18 million in cannabis revenues, but had expected to take in $35 million. This year the government expected it would bring in $100 million, but now estimates it will see only $66 million.
The government believes that number will continue to rise to $135 million next year and a steady increase until $220 million in 2023, according to a response to a question on the House of Commons’ order paper.
Those numbers represent only the federal taxes, with provincial taxes also being added to the purchase price. Before cannabis was legalized, the federal and provincial governments worked out a deal to split revenue from marijuana taxes, with 75 per cent of the money going to the provinces.
The excise tax is roughly $1 per gram and comes on top of GST and HST.
The government believes that number will continue to rise to $135 million next year and a steady increase until $220 million in 2023
As part of the agreement with the provinces, the amount of money that goes to Ottawa was also capped at $100 million for the first two years.
Finance Minister Bill Morneau’s press secretary, Pierre-Olivier Herbert, said the entire regulatory regime is about ensuring there is a safe legal market.
“We implemented a strict legal framework to regulate and restrict access to cannabis keeping it out of the hands of youth, and profits out of the pockets of criminals and organized crime,” he said in an email.
The government initially intended cannabis to be legalized by Sept. 1, 2017, but that was pushed back until late October. Herbert said that and other factors contributed to the lower tax haul.
“Various factors contribute to excise tax revenues including the volume of sales and available supply. Provinces are responsible for distribution, licensing and overseeing the distribution and sale of cannabis.”
Ontario is the biggest market for cannabis, but the first retail stores in the province didn’t open until April last year and they began on a limited basis with just 25 stores provincewide. The province said at the time that it didn’t want to add more stores than the industry could supply.
Early on, stores in Alberta and Quebec had to limit opening days because of supply shortages.
Store numbers have since grown and Ontario has lifted restrictions, with hundreds more expected to open this year.
Alberta, with a much smaller population, had a more open approach to new stores and more than 400 stores operate in the province today.
Before the retail stores opened, Ontario consumers could only get cannabis online through a provincial online store. Statistics Canada found that opening brick and mortar stores was key.
“Retail sales from cannabis stores in Canada’s most populous province accelerated significantly in April 2019 with the introduction of the first physical outlets,” the agency wrote in a report.
Statistics Canada issues an overview of the cannabis market after the first year and found that even with few stores Ontario was leading in sales.
Ontario had the most revenue from cannabis with $217 million in sales, followed by Alberta with $196 million and Quebec with $195 million. Nationwide the sector pulled in $907 million in sales in that first year.
Statistics Canada has also been tracking prices since before legalization and has found so far that illegal weed is falling in price, in order to compete with legal shops. There is also an approximately $4 per gram gap in prices with legal cannabis selling for around $10 per gram and illegal products selling for closer to $6.
Despite that price difference, the number of people buying cannabis legally is so far continuing to rise, according to the agency.