Yukon’s premier says he doesn’t expect the territory to make a profit on cannabis sales, at least in the early going.
“Based upon our estimates and the numbers that we’ve gathered we think that we’re not going to be making a profit in the first, if not the second, year,” Sandy Silver said following the finance ministers meeting this weekend.
Still, the premier said he’s happy with the deal the provinces and territories negotiated with the federal government over how taxes on cannabis can be split.
“We’re happy. We think we negotiated as much as we possibly could,” he said.
The federal government agreed to give the provinces and territories a 75-per-cent share of the tax revenues from the sale of legalized marijuana when that starts in July. Ottawa will retain the remaining 25 per cent to a maximum of $100 million a year, according to the two-year deal. Any cash above that limit will go to the provinces and territories.
The 75/25 split is higher than the original deal proposed by Ottawa which would have seen the money split 50/50. That option was widely criticized by multiple premiers, including Silver.
Ottawa originally bumped its offer to 70/30. According to Silver, when federal Finance Minister Bill Morneau realized the premiers were “standing together as much as possible on this,” the deal was increased to 75/25.
Earlier this year Prime Minister Justin Trudeau announced a proposed excise tax of $1 per gram of cannabis for sales up to $10 and 10 per cent of the total price for cannabis selling at a higher price point.
Yukon’s Department of Finance is estimating the territory will sell 700,000 grams of cannabis a year, said assistant deputy minister Clarke LaPrairie.
Based on that number, the Yukon is expected to bring in at least $525,000 annually from its portion of the federal tax.
Canada’s finance ministers have agreed to try and keep the price of cannabis at at approximately $10 a gram.
Silver said the territorial government won’t be adding any new taxes on top of what the federal government is implementing. He said it’s too soon to say exactly what the territory’s profit margins will be when it starts selling.
“You need to take a look at wholesaler costs margins, retailer cost margins — all that money is going to the provinces and territories. There’s flexibility in those numbers to make sure that we at least break even and then moving forward it would be good to make a slight profit,” he said.
Earlier this year the Yukon government released its proposed framework for cannabis legalization.
The territory is planning on having at least one brick-and-mortar location up and running in Whitehorse in time for nationwide legalization as well as an online retail store for Yukoners in the communities.
For now, the Yukon government is planning to have the sole authority to import, warehouse, transport and distribute recreational cannabis within the territory. The government has said it needs more time to develop regulations including a licencing system for private retailers.
“We’re still waiting for craft legislation, we’re waiting for the private sector ability to sell and so that will affect things as well as we go,” Silver said.
The Yukon government is accepting public feedback on its plans until Dec. 20.
It will be up to the provinces and territories to decide how much of the tax money ends up going to municipalities.
Municipalities, including the City of Whitehorse, have said they expect extra costs when cannabis is legalized.
The Federation of Canadian Municipalities has said it wants a third of the revenues earmarked to help municipal governments handle administrative and policing costs.
The Yukon government isn’t saying how much it would be willing to give to municipalities.
“This is something that we will speak with municipalities about,” cabinet spokesperson Sunny Patch said in an email. “Any decision on this would have to be based on cost incurred by the community.”
With files from the Canadian Press
Contact Ashley Joannou at ashleyj@yukon-news.com