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James Poelzer, CEO of Agrima Botanicals, handles seedling marijuana plants at his medical marijuana production facility in Maple Ridge, B.C., on January 10, 2014.Rafal Gerszak/The Globe and Mail

The B.C. government is denying medical-marijuana companies access to a property tax break intended for agriculture so that communities where the operations are located do not lose potential tax revenue.

On Tuesday, the government announced that it would not allow marijuana operations to claim the agricultural tax designation, starting with the 2015 tax year. The commitment addresses the concerns of B.C. municipalities over the issue.

James Poelzer, chief operating officer of Agrima Botanicals, which has been aiming to grow medical marijuana in Maple Ridge, B.C., said the decision is unfair.

"We're not trying to exploit a loophole or avoid taxes. We're growing plants, which is as agricultural as it gets," he said, protesting against a policy that would deny his business the break given to the rest of the agricultural sector.

But Agriculture Minister Norm Letnick said marijuana plants are not the same as, for example, tomatoes. "Medical marijuana is a federally regulated narcotic and tomatoes aren't," Mr. Letnick said in an interview.

Health Canada has approved five medical-marijuana operations in Central Saanich, Whistler, Maple Ridge, Nanaimo and Spallumcheen. The federal health department is projecting 10 such operations in B.C. in coming years.

Mr. Letnick said his government moved quickly in response to concerns from municipalities.

The government also announced Tuesday that medical-marijuana production will be allowed within the Agricultural Land Reserve, a use that can't be overridden by local government bylaws.

Mr. Poelzer said he had yet to calculate the financial effect of the new policy but that he doubted it would be a deal-breaker for either his operation or others, "It's just something we're going to have to deal with going forward," he said of his industry.

But he said he expected patients would pay as increased costs are passed on to them.

Mr. Letnick, however, was skeptical.

"I believe as more of these facilities are approved by Health Canada, there's going to be a balance in the marketplace as there usually is for any good," he said. "You'll find volumes will increase until equilibrium, to use my Economy 101, is found between supply and demand, which probably means that costs will be moderated by the competition."

The government's move was immediately hailed by the Union of B.C. Municipalities, as well as the NDP opposition.

Rhona Martin, president of the UBCM, said that the measure will mean more tax revenue for B.C. municipalities.

"What it means is that instead of getting farm taxes [from medical-marijuana operations], municipalities will get industrial taxes, which are more," she said.

A spokesperson for the organization said there are no forecasts available on the revenues that municipalities will receive as a result of the new policy. Mr. Letnick also said he did not have any such forecasts available.

NDP critic Selina Robinson said she only recently encouraged Community Minister Coralee Oakes, involved in the file with Mr. Letnick, to take the tax step. "I'm blown away," Ms. Robinson said of the development. "I'm pleased she has acted so quickly on this issue."

Ms. Robinson said tax rules for conventional agriculture were never designed for marijuana. "No one envisioned we would have marijuana growing legally on farms," she said.

Editor's note: An earlier version of this story spelled Selina Robinson's name incorrectly.