Slow pot-tax revenues down to slow rollout of retail operations: Suppliers

Legal pot is a booming business for Evergreen Cannabis on West 4th Avenue in Kitsilano, but co-owner Mike Babins also understands how tax revenues to the province are falling short of expectations.

“There’s only three stores open in the city and none in Victoria,” Babins said.

“I see (tax revenue) coming in very fast as stores open, as (retail sales) spread across the province,” Babins added, but in the meantime there are “not enough shops and too many alternatives that are too tempting.”

This week The Ministry of Finance revealed that it received its first instalment of B.C.’s share from the federal excise tax on legal marijuana sales, a $1.3-million payment for October, covering the days after official legalization Oct. 17.

And ministry staff said the province now expects its excise-tax take will add up to $68 million over the first three years of legalized recreational cannabis sales, which is considerably less than B.C.’s pre-legalization estimate that its share of excise-tax revenue could total $200 million over that period.

The federal government set a special excise-tax rate of $1 per gram for legal cannabis priced at $10 or less and 10 per cent on sales over $10 a gram, with revenue to be split 75 per cent to the provinces and 25 per cent to stay with the feds.

That first look at excise-tax revenue, however, appears “pathetic,” said cannabis executive Dan Sutton, “because we aren’t selling as much cannabis as we could be.”

“Why? Because we don’t have enough localized supply, we don’t have enough distribution points and just generally are not fostering the industry in the way government could or should be doing,” said an impatient Sutton, CEO of the B.C.-based licensed producer Tantalus Labs.

Sutton said taxes will always be a disincentive for cannabis consumers to buy from the legal market, but “I think we need to generate tax revenue and the taxes seem appropriately priced at this time.”

However, B.C.’s October excise-tax payment was generated from just online sales and the single bricks-and-mortar provincial B.C. Cannabis Store that the province was able to get opened for the legalization date.

Since then, the province has issued licences to just 14 private cannabis retail locations (including Evergreen), according to the Liquor and Cannabis Licensing Branch website. Another 316 of 466 retail applications have been forwarded to municipalities or First Nations for their consideration.

In an emailed statement, Finance Minister Carole James said the province didn’t expect cannabis would generate substantial revenues for the province considering the costs also associated with setting up the new regulatory regime.

And B.C. municipalities are still waiting for word on how much the province is willing to pass on to them to help with new costs they’re already absorbing related to regulating legal pot, said Arjun Singh, president of the Union of B.C. Municipalities.

“We were sort of hoping for a provincial budget announcement on this,” said Singh, who is also a longtime Kamloops city councillor, “but obviously that didn’t happen.”

The Union of B.C. Municipalities, at its convention last fall, put a proposal to the province that it pass on 40 per cent of B.C.’s excise revenue to municipalities to help them cover costs related to new zoning, planning work and policing associated with licensing that municipalities can’t tax for.

Singh said the province has been receptive, but has asked municipalities to forward more information about those costs, which they’re working on doing.

“As soon as we have at least some certainty about what money could flow back, whatever that big pot is, whatever proportion that would be, that would be good,” Singh said.

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