{"id":81271,"date":"2022-10-17T14:23:53","date_gmt":"2022-10-17T18:23:53","guid":{"rendered":"https:\/\/brocku.ca\/brock-news\/?p=81271"},"modified":"2024-09-01T09:54:38","modified_gmt":"2024-09-01T13:54:38","slug":"armstrong-after-four-years-of-legal-cannabis-provinces-should-review-their-policies","status":"publish","type":"post","link":"https:\/\/brocku.ca\/brock-news\/2022\/10\/armstrong-after-four-years-of-legal-cannabis-provinces-should-review-their-policies\/","title":{"rendered":"ARMSTRONG: After four years of legal cannabis, provinces should review their policies"},"content":{"rendered":"

This article written by Michael Armstrong, Associate Professor of Operations Research, was originally published in The Conversation<\/a>.<\/em><\/p>\n

Oct. 17 marks the fourth anniversary of Canada\u2019s recreational cannabis legalization. When\u00a0The Cannabis Act<\/a>\u00a0was passed in 2018, Canada became\u00a0the second country in the world<\/a>\u00a0to legalize the sale, possession and non-medical use of cannabis by adults.<\/p>\n

Now, four years on, the\u00a0federal government is reviewing the law<\/a> to see if it\u2019s meeting Canadians\u2019 needs. Morris Rosenberg, the former deputy minister of justice, will chair an\u00a0expert panel for that purpose<\/a>.<\/p>\n

Similarly, the Ontario Cannabis Store\u00a0recently announced a \u201cholistic review\u201d<\/a>\u00a0of its pricing. Other provincial and territorial governments should follow these examples and likewise start looking for improvements in their cannabis rules.<\/p>\n

The industry\u2019s rapid growth<\/h2>\n

During Canada\u2019s first month with legal recreational cannabis, there were only about 100 licensed stores and\u00a0sales were just $42 million<\/a>.<\/p>\n

But the\u00a0industry grew quickly<\/a>\u00a0\u2014 even the\u00a0pandemic didn\u2019t slow it down<\/a>\u00a0\u2014 and Canada now has more than 3,300 licensed stores. Legal cannabis products are more accessible than ever.<\/p>\n

Legal products also became more competitive with illegal ones thanks to\u00a0dry cannabis prices dropping 25 per cent<\/a>\u00a0since 2018.\u00a0In some provinces, they now start<\/a>\u00a0at\u00a0$3.57 per gram including taxes<\/a>. Improved\u00a0cannabis product quality<\/a>\u00a0has also made those products more competitive with illegal ones.<\/p>\n

Consequently, monthly recreational cannabis sales hit\u00a0$395 million<\/a>\u00a0in July, just over half the size of Canada\u2019s\u00a0beer sales<\/a>.<\/p>\n

However, not all is well with industry. Producers\u2019 profits have\u00a0suffered due to overproduction<\/a>. Meanwhile, stores in some places,\u00a0like Toronto<\/a>\u00a0and Manitoba<\/a>, face too many competitors.<\/p>\n

After having\u00a0little information about the health impacts of cannabis<\/a>\u00a0for years, evidence is starting to emerge. A recent study\u00a0found an increase in cannabis hospitalizations among young children<\/a>\u00a0\u2014 all the more reason to review cannabis rules.<\/p>\n

The federal government\u2019s review only covers things within its jurisdiction, like producers, products and\u00a0pardons<\/a>. Since the provinces regulate retailing and consumption, it\u2019s crucial they review their rules too.<\/p>\n

Cannabis taxes vary<\/h2>\n

Aside from health-related issues, the provinces should revisit their cannabis rules on taxation. Ontario\u2019s cannabis excise taxes during 2021-22 totalled\u00a0$215 million<\/a>, twice that of the year before. Profits at its Ontario Cannabis Store wholesaler, likewise doubled to\u00a0$184 million<\/a>. I estimate Ontario also collected about $121 million in sales tax, putting its combined cannabis cash haul at around $520 million.<\/p>\n

This means the provincial government received about 30 cents out of every dollar its residents spent on legal recreational cannabis last year. The Ontario Cannabis Store spent another six cents on operating expenses.<\/p>\n

By comparison, I estimate the federal government collected a relatively modest eight cents in taxes. That left about 20 cents for retailers and 36 cents for producers. Those businesses spent some of that on government licences, property taxes and income taxes.<\/p>\n

Or consider Alberta, which often\u00a0brags about charging no sales tax<\/a>\u00a0but rarely mentions its extra\u00a016.8 per cent cannabis excise tax<\/a>. That surcharge likely contributed about $74 million of the\u00a0$164 million<\/a>\u00a0Alberta collected in cannabis taxes last year.<\/p>\n

Governments clearly need revenue from someplace. But is it appropriate to extract so much from consumers in ways that ignore the industry\u2019s low profitability?<\/p>\n

Provincial agency operations<\/h2>\n

Provinces also should review their cannabis agencies\u2019 operations, including whether those agencies should keep their wholesale monopolies. The Ontario Cannabis Store, for example,\u00a0collects wholesale markups of about 31 per cent<\/a>\u00a0\u2014 even on sales it doesn\u2019t touch, when producers sell directly in stores \u2014 when just 10 per cent would cover its operating costs.<\/p>\n

And as monopolies, the agencies become bottlenecks if they fail. When\u00a0computer troubles in Ontario<\/a>\u00a0and\u00a0a strike in British Columbia<\/a>\u00a0temporarily stopped shipments from cannabis agencies last summer, retailers lost money because they ran out of products. Why not let products flow directly from producers to retailers instead,\u00a0like Saskatchewan does<\/a>?<\/p>\n

A second issue is whether provincial cannabis agencies have enough stores. Qu\u00e9bec\u2019s efficient cannabis agency\u2019s\u00a0retail-plus-wholesale markup was just 38 per cent<\/a>, compared to the Ontario Cannabis Store\u2019s 74 per cent. But with\u00a0fewer stores<\/a>\u00a0per capita than other provinces, its legal sales per capita were the lowest. That\u00a0left more of the market for illegal dealers<\/a>.<\/p>\n

Lastly, provinces should consider simplifying rules to help retailers, without hurting public policy. For example, Alberta recently removed its requirement for\u00a0stores to cover their windows<\/a>. Transparent glass can make shops safer for staff inside, and street-friendlier for pedestrians outside.<\/p>\n

Store locations are key<\/h2>\n

Retail density is another key consideration. At one extreme, some Ontario neighbourhoods\u00a0have too many shops<\/a>. This clustering occurred partly because the province stalled licensing for a year. The government should make it easier for cannabis businesses to move to underserved areas, thereby reducing the retail hyperconcentration.<\/p>\n

Conversely, some rural areas have too few customers to support standalone shops.\u00a0Newfoundland handles that<\/a>\u00a0by letting general stores sell cannabis. Other provinces could consider doing the same thing.<\/p>\n

There are also some cities, like\u00a0Mississauga, Ontario<\/a>\u00a0and\u00a0Richmond, B.C.<\/a>, that have no legal stores because provincial governments let local councils opt out. While it was a smart political move for provinces to allow municipalities to opt out, it might not be a wise policy move.<\/p>\n

Learning from experience<\/h2>\n

As one of the few countries to legalize recreational cannabis, Canada has set an example for others to follow. A growing number of places, including\u00a0Thailand<\/a>,\u00a0Malta<\/a>,\u00a0South Africa<\/a>,\u00a0Mexico<\/a>\u00a0and\u00a0Germany<\/a>, are working to implement nationwide legalization.<\/p>\n

Even the United States federal government recently took a tiny step toward reforming its\u00a0conflicted cannabis law patchwork<\/a>. In the U.S., some states have passed laws authorizing cannabis sales, but they remain illegal at the federal level.<\/p>\n

These countries can learn much from Canada\u2019s four years of experience. But Canada\u2019s provincial and territorial governments should learn from that experience as well by reviewing their rules.<\/p>\n

\"The<\/p>\n","protected":false},"excerpt":{"rendered":"

This article written by Michael Armstrong, Associate Professor of Operations Research, was originally published in The Conversation.<\/p>\n","protected":false},"author":1,"featured_media":57092,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[39,7,6,1],"tags":[594,4395,5512],"_links":{"self":[{"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/posts\/81271"}],"collection":[{"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/comments?post=81271"}],"version-history":[{"count":2,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/posts\/81271\/revisions"}],"predecessor-version":[{"id":81273,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/posts\/81271\/revisions\/81273"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/media\/57092"}],"wp:attachment":[{"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/media?parent=81271"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/categories?post=81271"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/brocku.ca\/brock-news\/wp-json\/wp\/v2\/tags?post=81271"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}