Pot taxes must stay low to beat black market, study says

C.D. Howe estimates legalized cannabis could generate about $675 million in government revenues next year.

April 11, 2017   by CP Staff

OTTAWA — A new analysis says governments can wrestle recreational-pot proceeds away from criminals as long as they don’t expect an early revenue windfall from legalized weed, either.

The study by the C.D. Howe Institute think tank estimates legalized cannabis would generate about $675 million in 2018 in combined revenue for federal and provincial coffers through existing sales taxes.

However, the report also says if authorities want to raise even more cash through additional taxes, they risk undermining their stated priority of squeezing out the black market.

The study is being released as the Trudeau government prepares to introduce legislation Thursday to begin the process of legalizing pot.

Using a $9-per-gram example, study author Rosalie Wyonch estimates 90% of Canada’s weed market would be legitimate if existing sales taxes were the only taxes applied.

But if governments seek to lift their total tax revenues on pot sales to around $1 billion, she says illicit sales would likely grow to about half of Canada’s marijuana market.

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