Original cannabis journalism for Canadians

Would You Buy a Government Gram for $10.17?

Federal Finance Minister Bill Morneau, with all his provincial ducks in a row. (Sean Kilpatrick / The Canadian Press)

Federal Finance Minister Bill Morneau, with all his provincial ducks in a row. (Sean Kilpatrick / The Canadian Press)

Cannabis legalization, to hear the federal government tell it, is all about beating the black market at its own game by selling quality-controlled weed to the masses at a competitive price.

The trick is, a century of prohibition means the black market is already very good at doing what it does.

But market forces always prevail, the federal legalizers would argue. If we sell this stuff for cheap, Canadians will abandon their beloved dealers and dispensaries in droves to line up outside the legal stores.

The problem is, it looks like legal marijuana might actually cost more than illegal bud, at least at first.

Monday's big federal-provincial tax deal on cannabis (agreed to by every province and territory except Manitoba) includes a $10 per gram price target, taxes included. A November background document from the federal finance department breaks that down as follows:

One gram of dried cannabis
Pre-duty price: $8.00
Excise duty (per gram): $1.00
Subtotal: $9.00
GST/HST: $1.17
Total: $10.17

One gram of dried cannabis

Pre-duty price: $8.00
Excise duty (per gram): $1.00
Subtotal: $9.00
GST/HST: $1.17
Total: $10.17

So, one gram of government-approved cannabis will likely cost $10.17 (or $10.15 after rounding down, since pennies are a thing of the past).

Will that be cheaper than the black market? To quote the Magic 8-Ball, "Outlook not so good."

Last year, the Parliamentary Budget Office used crowdsourced data from PriceOfWeed.com to determine that a gram of black market weed sold for an average of $8.32 in Canada from 2015 to 2016.

Remember, though, that illicit cannabis dealers typically offer bulk discounts. When the PBO weighted its data by purchases sizes, the average price was $9.36 per gram — still cheaper than the expected government price.

The PBO saw this price differential coming.

"Excise taxes will likely push the legal price above the illicit prices observed in 2015-16," predicted the PBO's 2016 report.

If legal cannabis does turn out to be a bit more expensive than illegal cannabis, will Canadian cannabis consumers be willing to pay more for the legal product? Or, will they stick with an illegal source that's tried and true?

On Monday, federal finance minister Bill Morneau said beating the black market will not happen immediately.

"We've done some estimates, as you would expect, in terms of the movement from effectively the black market to what we hope will be a legal market, so we can regulate it. Our expectation is that by keeping the prices low, we will be able to get rid of the black market," said Morneau.

"However, that will happen over time."

Next December, Morneau and the provincial finance ministers are due to meet again and see how their cannabis taxation agreement is working out. Maybe that's when we'll see the cannabis tax regime adjusted to make the price of legal weed more competitive with the black market.


New on The Leaf

  • Former Top Cop Talks Pot: We called up Liberal MP Bill Blair to ask him about various aspects of his government's cannabis legislation. Blair was relentlessly on-message, but did acknowledge that the black market for cannabis is "not all patch-wearing motorcycle-gang members."
  • Military Might: In Italy, the military is responsible for growing medical marijuana. Not everyone's happy about it.
  • BYOP: The city of Denver is reviewing the first application from a coffee shop that wants to become one of that nation's first legal bring-your-own-pot marijuana clubs.

Elsewhere on the Weed Wide Web

  • Think of the Children: In the U.S., new federal data suggests young Coloradans are using less cannabis than they have in the recent past, even after legalization. That's an encouraging sign for Canada's federal government, which has predicated legalization on protecting children. Read it at the Washington Post.
  • Broken Treaties: Cannabis legalization in Canada could well violate the 1961 Single Convention on Narcotic Drugs, and opponents of legalization say that's a good reason to cancel the party. In an analysis for iPolitics, a group of in-the-know columnists argue it's really not a deal-breaker from the perspective of international law.
  • Booze and Bud: Nova Scotia is bucking the trend — and expert advice — with a plan to sell cannabis in liquor stores. Read more from Amanda Siebert at The Georgia Straight.

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