Canadian marijuana stocks surged Friday after Prime Minister Justin Trudeau’s government proposed a tax of one dollar a gram of legalized recreational marijuana.
For example, 1 gram of dried cannabis costing C$8 to produce would be taxed at C$1, and the total cost of C$9 would be hit with a sales tax of C$1.17, bringing the total to C$10.17, the government said in a statement. The example uses tax rates that apply in provinces such as Ontario. Rates vary in other provinces.
Aurora Cannabis Inc. surged 15 percent to settle at C$4.64 in Toronto, the highest closing price on record. Canopy Growth Corp. gained 3.3 percent, Aphria Inc. rose 4.1 percent and MedReleaf Corp. rallied 5.3 percent.
Total tax revenue could be as much as C$1 billion a year, said Bill Blair, the former Toronto police chief turned lawmaker who’s leading the government effort to legalize pot. He stressed estimates are “speculative,” since it depends on how large the legal market will be.
“In order to be effective, governments at all levels will need to work together and taxes will need to be appropriate,” Blair told reporters Friday in Ottawa. The tax proposal “will help us keep cannabis out of the hands of youth, keep the profits out of the hands of criminals,” he said.
Canada will legalize recreational marijuana by next July and the plan echoes Trudeau’s recent proposal to make the price of recreational weed low enough to squash the black market. The federal government proposes to split the producer tax revenue equally with the provinces, however provinces such as Ontario are asking for a bigger cut, arguing that many of the key elements of the plan, including setting up sales and distribution regimes, are up to them.
Canada’s federal and provincial finance ministers are due to meet in December.
credit:bloomberg.com
