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Part of cannabis laws and regulations

One of the main points of cannabis legalization, we are incessantly told, is to cripple the black market.

So why is the Trudeau government suddenly floating a surprise 2.3-per-cent “annual regulatory fee” – i.e., a tax – that will be applied to the gross revenues of large-volume marijuana growers?

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The baseline requirement for countering the illicit pot trade is for the legal stuff to be priced modestly. This is the opposite of that. Coupled with a previously announced $1-a-gram excise tax, the proposed 2.3-per-cent levy (1 per cent for small-scale growers) will likely boost the cost of legal weed.

There is evidence, notably from Colorado, suggesting regulators should err on the low side when it comes to pricing signals; it’s easier to hike taxes and fees later on than to lower them, particularly given the addictive response new revenue streams seem to awaken in governments.

Then there is the question of how pricing affects the promising, but still nascent, Canadian cannabis industry.

The trade association representing Canada’s biggest marijuana players was caught off guard by the feds’ clever cost-recovery plan. Its members are not chuffed about the prospect of coming up with an extra and unexpected $100-million per year.

It’s easy to sympathize with their unease, given they aren’t yet certain of exactly how engorged their revenue streams will be – although, given that the legal marijuana trade is currently valued at $15.7-billion by New Frontier Data, an industry watcher, the answer will surely be expressed in degrees of “very.”

But that’s not to say it’s a sure thing. In the United States, prices for legal cannabis have been falling for the better part of two years, forcing companies to revisit their business models and cut costs. According to a report in The Economist late last year, the wholesale price in Colorado dropped nearly 40 per cent between 2015 and 2017.

The government should listen to what Canada’s pot growers have to say and consider its options carefully. To do otherwise is to risk undercutting an industry, not to mention a key policy objective.

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