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Statistics Canada revealed for the first time Wednesday how much tax revenue cannabis is drawing in since legalization — a total of $186 million for the first five and a half months of legalization.
The amount is made up of product-specific excise taxes and general taxes, such as the Harmonized Sales Tax (HST), Goods and Services Tax (GST) and Provincial Sales Tax (PST).
Excise taxes are usually around $1 per gram, or 10 percent of the price, while general taxes vary by province.
In total from excise taxes, the federal government received $19 million while provincial governments got $79 million.
For general taxes on goods and services, the federal government got $35.5 million, while provinces got $52.7 million from cannabis sales.
Overall, the provinces took in more tax revenue than the federal government from general and excise taxes — $132 million compared to $55 million for the feds.
The excise tax is split between the provinces and the federal government, with the former gaining 75 percent of it and the latter 25 percent.
The federal government had originally wanted an even split, but provinces requested more given they would bear the cost of setting up a retail network, as well as policing and healthcare costs.
Tax revenue lower, but expected to increase
As cannabis sales grew, excise taxes from cannabis also grew 12.4 percent in the first quarter of 2019 from the fourth quarter of 2018, according to StatsCan.
Over the same period, general taxes on goods and services from cannabis sales were up 68.1 percent due to higher sales.
The total revenue gained from cannabis taxes increased 35 percent between the last quarter of 2018 and the first quarter of 2019, up from $79 million to $107.1 million.
Statistics Canada predicts that tax revenue from cannabis could rise even further in the second half of the year, given that provinces’ cannabis retail networks will be expanding.
Conference Board of Canada economist Robyn Gibbard said in a statement the tax numbers are “lower than expected” due to the “bumpy” rollout of legalization last fall.
Cannabis legalization Canada came with a slow rollout of legal retail stores and reports of low supply.
This has led a lot of people to stick with the black market for non-medical cannabis sales. Statistics Canada’s numbers show that in the first quarter of 2019, $1 billion was spent on the black market compared to $377 million in the legal market.
It is tricky business taxing cannabis at a reasonable level without sending people to the black market.
Legal cannabis is still more expensive than illegal cannabis, at an average $6.51 per gram from the illicit market compared to $9.70 a gram from legal sources, according to Statistics Canada.
Gibbard though is confident that once the “kinks” are worked out, “governments can expect strong growth in revenues from cannabis sales going forward.”
More retail store openings are planned across Canada, and upcoming sales of edibles should help add more money to the government coffers.
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