When Canada legalized cannabis in 2018, Port Coquitlam, British Columbia, like many other municipalities, began to rapidly develop the framework for dispensaries to set up shop.
Mayor Brad West said his city was eager to get on board, not only to tackle the black market, but also because many municipalities believed they would share in cannabis excise tax revenue collected. by the federal government to producers.
“That turned out not to be the case for anyone, because whether you have stores or not, there’s no revenue,” West said.
Cannabis has been legal for nearly four years, but despite federal government expectations of tax revenue sharing with local governments, municipalities have yet to receive a single penny from the province.
The municipalities are now asking the province to finally establish a sharing agreement.
“It’s the fairest thing to do since local government has been very important in establishing this industry,” West said.
Cannabis revenue ‘falls short’: province
The province says its agreement with the federal government on the excise tax never stipulated that revenues be shared with municipalities.
But Canada’s Department of Finance, in a written statement, said it expected “a substantial portion of the revenue” to be transferred to local communities.
Selina Robinson, British Columbia’s finance minister, declined an interview, but admitted in a statement that cannabis revenues were lower than expected.
“While cannabis revenues are growing, the market is still maturing. The costs associated with legalization to the province remain. This includes licensing, regulatory and enforcement costs,” she said.
As of May 2022, the province says it received $112.74 million in federal excise duty payments, or $30 million in the first four months of 2022 alone.
The province also collected $91.3 million in PST on cannabis sales during this period.
West would like the province to share in the wealth.
“It seems logical and it would be fair that at least some, even a small part, be returned to the level of government that was able to make this happen on the ground,” West said.
Expectations VS Reality
Prior to legalization, the federal government decided that cannabis excise tax revenues would be split 25/75 between Ottawa and the provinces and territories, respectively.
In Budget 2018, Bill Morneau, then Minister of Finance insight offered in one of the reasons why Canada was giving away the biggest slice of the pie.
“The federal government expects that a substantial portion of the revenue from this tax room granted to the provinces and territories will be transferred to municipalities and local communities, which are on the front line of legalization,” he wrote. .
This expectation has not been forgotten by municipalities in British Columbia.
Laurey-Anne Roodenburg, president of the Union of British Columbia Municipalities, said resolutions calling for a province-sharing agreement have been passed four times in the past five years at the annual convention of the British Columbia. union.
“The question is, when are they going to be able to pay part of the cannabis tax as the federal government intended?” she says.
So far, only Ontario, Quebec and Alberta have forwarded cannabis excise tax revenues to local governments.
Municipalities say they bear a “significant” burden
While the City of Port Coquitlam was quick to introduce the framework to license cannabis retail stores, West admits it was a significant investment.
Municipalities were responsible for designing the entire application and approval process, as well as public consultation, local enforcement, planning and zoning, and municipal administration.
This is work that local governments did not initially expect to have to do, he said.
“But then we discovered, as the province laid out its framework, that our role was going to be important and almost decisive in the fact that if the local government does not put in place a process, then there is no mechanism. for retail outlets to enter a city,” West said.
And while the initial setup was intensive, it wasn’t a one-time expense either.
A 2019 report by UBCM estimates that legalizing cannabis and opening dispensaries would cost local governments $11.5 million per year in additional costs.
Given these additional burdens, Roodenburg says it’s fair that municipalities receive a portion of the tax revenue.
“It would give us another tool in our financial toolbox. It’s another opportunity that’s not strictly based on [property] taxation,” she said.
West agrees it could go a long way toward meeting municipal responsibilities like developing and maintaining parks, keeping the city clean and fixing potholes without having to raise property taxes.