Cannabis generates C$186 million in tax revenue in Canada in first months of legalization

FILE PHOTO: Customers and staff at the Hunny Pot Cannabis Co. retail cannabis store shop as marijuana retail sales commenced in the province of Ontario, in Toronto, Ontario, Canada April 1, 2019. REUTERS/Moe Doiron/File Photo

OTTAWA (Reuters) - Canada’s federal and provincial governments earned C$186 million ($140 million) in tax revenues from direct sales of cannabis in the first 5-1/2 months of legalization, Statistics Canada data showed on Wednesday, after two major provinces cut their revenue forecasts.

Statistics Canada found Ottawa collected a combined C$55 million in revenue via federal excise and goods and services taxes. Provincial tax revenues were estimated at a combined C$132 million.

The figures were below projections, said Robyn Gibbard, an economist for the Conference Board of Canada think tank, “thanks in part to the bumpy rollout of legalization last fall.”

“However, we think that as the kinks are worked out, governments can expect strong growth in revenues from cannabis sales going forward,” he said in a statement.

Earlier this year, several Canadian provinces, including Ontario and British Columbia, cut their cannabis-revenue forecasts because of a slow start caused by supply shortages and higher prices compared with the black market.

In Ontario, Canada’s most populous province, retail cannabis stores only opened at the beginning of April.

Government tax revenues from cannabis sales “may rise further in the second half of the year, as additional cannabis retail outlets are scheduled to open,” Statistics Canada said.

Under Canada’s legalization framework, the federal government receives 25% of the excise tax revenue, with the remaining amount going to the province where any given sale occurs.

Statistics Canada noted on Wednesday that general goods and services taxes on cannabis ranged between 5% and 15%, depending on the region. Excise taxes on cannabis are set at C$1 per gram or 10% of the pre-tax transaction, the agency said.

Reporting by Kelsey Johnson in Ottawa; Additional reporting by Nichola Saminather in Toronto; Editing by Peter Cooney