Canada's largest grower 'comfortable' with federal government's pot tax plan

Canada's largest grower 'comfortable' with federal government's pot tax plan
From CBC - October 5, 2017

The federal government's plan for a10 per cent "sin tax" on legalized recreational marijuanasalessounds good to the head of Canada's largest,publicly-traded marijuana producer.

"This is sort of at the mid-to-low point on the models we ran. It's a comfortable number. It works," saidBruce Linton, founder and CEO of Canopy Growth Corp. He notes that it's lower thanthe excise tax onother "optional or luxury products," such as alcohol.

The federal government laid out its pot taxation planon Tuesday during a meeting with the premiers. Prime Minister Justin Trudeau proposed an excise tax of $1per gram of cannabis for pot sales up to $10, rising to 10 per cent of the total price for pot selling over $10, once the drug is legalized in July 2018.

That tax would be in addition to the federal and provincial sales taxes. So while the total amount of taxes paidwill vary from one province or territory toanother, it could mean a combined tax rate of roughly 25 per cent in several provinces. All while the legal product tries to compete with black market producers who wo not pay any tax at all.

But Lintonis not worried.

"We are able to sell our product now at about $7.50 a gram and we charge GST or HST on top of that even though it's a medicine. To think it could retail for $10 and have the taxes embedded that's not a big stretch. And that's at or below the average black market price."

He believes legal producers will have an added advantage because they will be able to grow in larger quantities, while illegal producers have to contendwith potential arrest. On top of that, he arguesCanadians will prefer a regulated and legal source of cannabis over the uncertainty of an illegal product.

Trudeau has repeatedly said one of the main reasons he wants to legalize pot is to cut off a source of funding to the black market. He has referred to the "shady character in a stairwell," as well as street gangs and gun runners who profit from the illegal market.

Tax not 'unreasonable,' says former pot czar

When Colorado legalized, its tax rate approached nearly 30 per cent, though about half of that was a wholesale tax paid by retailers. He thinks Canada's proposed taxation plan is just about right.

"It does not seem unreasonable to me."

Freedman said it's important to consider the goal of taxation.

"My goal would be to ensure that the product continues to be expensive enough as to not create more users who are likely to abuse the drug. A roughly 25 per cent tax is likely to keep at least initially the prices at a fairly high rate, not too cheap to bring a whole bunch of new entrants into the market."

Market will dictate price

Tax plan 'ridiculous'


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