Pallister’s pot-postponement problem

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This article was published 20/07/2017 (3030 days ago), so information in it may no longer be current.

Premier Brian Pallister has shown great determination for tightening Manitoba’s belt. But he’s had less success finding new revenue to fatten the province’s wallet.

For a premier who has unleashed a wide array of tough-love measures he says are necessary to return Manitoba to fiscal stability, Mr. Pallister has been surprisingly quiet about legalized marijuana as a potentially rich source of new revenue.

At a meeting of premiers in Edmonton this week, Pallister repeated his pitch for an extension of the federal government’s July 1 deadline for legalization, saying provinces need more time to deal with tricky issues such as distribution, sales, a minimum age and drugged-driving enforcement.

On Wednesday, his concerns gained some support, but not all premiers are as eager to postpone this new revenue. New Brunswick Premier Brian Gallant said legalized cannabis could be an “economic opportunity” for his province.

Financial consultants agree. A report last year from CIBC World Markets said Canada’s federal and provincial governments could reap as much as $5 billion annually in tax revenues from the sale of legal marijuana.

A report eight months ago from Canada’s Parliamentary Budget Officer wasn’t as enthusiastic, suggesting initial revenue for governments from taxation could be in the hundreds of millions of dollars, rather than billions. But the analysis suggests those revenues are likely to increase as the market grows and production costs for the industry decrease.

In Colorado, which legalized marijuana about three and a half years ago, the industry was worth US$1.3 billion last year, bringing the state US$200 million in tax revenue.

While Mr. Pallister’s desire to successfully manage the many impacts of legalizing marijuana is understandable, even commendable, there’s a danger of lost revenue potential if Manitoba moves more slowly than other provinces.

Federal officials have said Ottawa will likely approve an expanded mail-order system to supply recreational marijuana to customers in provinces that don’t have a sales network in place by July 1. That would mean money spent by Manitobans on marijuana would leave the province and, once they’re used to buying by mail, customers in this province might continue to do so even after Manitoba is belatedly open for bud business.

Also, if Manitoba is slow in setting up shop, sellers in Kenora, Ont., and Moosomin, Sask., might be happy to sell to visiting Manitobans, once again robbing the Manitoba treasury of revenue Mr. Pallister so desperately needs.

Mr. Pallister and his team should ensure Manitoba marijuana outlets are open for business as soon as pot becomes legal. To meet the deadline, they can lean on the experience of eight U.S. states that have already legalized it, using these examples to devise the network of distribution and sales that will work best for Manitoba. After the stores are open, Manitoba’s marijuana laws and systems can be fine-tuned as necessary, in the same way that Manitoba’s alcohol laws have often changed with the times.

In the April 2016 provincial election, Manitobans elected a skilled entrepreneur who knows how to start from nothing. In private industry, Mr. Pallister began his business career by working out of his car, eventually building a highly successful financial-services firm.

With marijuana about to become big business, Manitoba is fortunate to have a premier who has the business acumen to get the best deal on behalf of the Manitoba treasury. He should see this challenge as an opportunity, not a burden.

Marijuana is a growth industry, in more ways than one.