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B.C. Premier John Horgan is warning cities they can’t gouge cannabis businesses with licensing fees if the province wants to squeeze out the sizable black market once the drug becomes legal next summer.John Lehmann/The Globe and Mail

B.C.'s Premier is warning cities they can't gouge cannabis businesses with licensing fees if the province wants to squeeze out the sizable black market once the drug becomes legal next summer.

John Horgan said Wednesday that all levels of government must be careful not to tax the drug too heavily if the legal supply is to compete with prices in the underground market. For municipalities, that means not "piling tax upon tax" by charging high fees for legal cannabis firms to operate in their communities, he told reporters during his weekly news conference.

"If the regional governments, for example, want to have their business permits and permits to operate in city limits, that's going to increase the cost of the product to consumers and it may well be that the black market survives this transition," he said. "I want to make sure that doesn't happen."

Canada's cannabis black market is estimated at about 400,000 kilograms a year, although it's not clear how much of that is from online sales from dispensaries, which ship their products undetected through Canada Post.

British Columbia, long home to the country's largest network of illicit cannabis producers and more than a hundred illegal pot shops, has no timetable for releasing its plan to regulate the drug once prohibition ends next summer. Most other provinces have announced how they will regulate the distribution and sales of cannabis products.

Mr. Horgan said B.C. had expected to be able to add its own tax on cannabis in order to bolster law enforcement and public health, and to establish a regulatory framework and system of sales. But, he said, the province is rethinking that after Ottawa's proposal – heavily criticized by the provinces – for an excise tax on all cannabis sales of roughly 10 per cent, split evenly with the provinces.

Last month, B.C.'s provincial-municipal cannabis committee met for the first time and plans to continue to meet every two weeks for the near future to discuss issues such as how all three levels of government should split any revenue from the nascent sector.

Vancouver Councillor Kerry Jang, co-chair of the provincial-municipal committee, said communities don't know what types of costs they will incur until the new provincial framework is crafted.

"If the province is doing all the work on it, then we don't need money," he said on Wednesday. "Right now, everybody's assuming – all three levels [of government] – that they're going to have to pay for everything.

"So they're all making sure to say, 'We need a part of this, so we're not left holding the bag.'"

Mr. Jang said his city's approach to charging illegal cannabis dispensaries $30,000 for a licence to operate will have to be reviewed once the provincial and federal laws are finalized. He said Vancouver's bylaw regulating the land use of these pot shops has not recovered the costs of regulating dozens of scofflaw locations because a number of injunction applications are still winding their way through the courts.

"We're behind [on putting unlicensed shops out of business], but that's because everybody knows the courts won't hear them til next year," he said.

In Victoria, local politicians passed a similar bylaw on the basis that their rules can eventually be adapted to any framework regulating the storefront sale of the drug. But city hall there was only allowed to charge pot shops a business-licensing fee of $5,000 because B.C.'s provincial Community Charter stipulates such fees can only be levied to cover costs. Vancouver is governed by its own charter, which allows for higher licensing fees.

Alberta Premier Rachel Notley said she was surprised by the recent federal proposal to levy an excise tax on recreational marijuana once it becomes legal next July, with the provinces and territories receiving just half the revenue. The federal Liberal government has earmarked just over $274-million to support policing and border efforts associated with legalized pot, with some of the money to be made available to the provinces.

- With a report from Justine Hunter in Victoria

The federal government is proposing a series of cannabis regulations, including packaging with tobacco-like health warnings. Health Minister Ginette Petitpas Taylor outlined the consultation paper proposals on Tuesday.

The Canadian Press

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