As the federal government’s plan to legalize recreational marijuana next year moves ahead, there are still many challenges, including how pricing and taxation of the drug will work.

In letters to the governments of Alberta, New Brunswick and Ontario, the Canadian Life and Health Insurance Association has asked those provinces to consider the potential affect on the medical system when creating regulations around the drug. The main concern is that employees may attempt to gain access to marijuana through their group benefits plan without a legitimate medical need, Benefits Canada reported last week.

Read: CLHIA warns high prices for recreational marijuana will push users to medical system

A memo published by the C.D. Howe Institute in July suggested that if provincial governments are to reach their goal of undercutting the black market for recreational marijuana, prices and applicable taxes will need to be quite low.

It identified the sweet spot at about $9 per gram, a price at which consumers would be most willing to buy recreational marijuana legally. If the base price sits at $7.50 with an added 10 per cent in taxes, more than 90 per cent of the market will be legitimate, according to the memo.

That number is in step with a report from the office of the parliamentary budget officer, which noted in November 2016 that “when legalization occurs, the government may have little fiscal space to apply tax without pushing the price of legal cannabis significantly above the illegal market price. Even with only a sales tax, legal cannabis prices in 2018 will likely be as high as illicit market prices in 2015-16.”

Read: Employers concerned about ‘Wild West’ surrounding marijuana legalization: HRPA

Are you concerned that high prices and excessive regulation of recreational marijuana when the law changes next year will push employees to seek coverage under their group benefits plans? Have your say in our weekly online poll.

Last week’s poll surveyed the sentiment around Saskatchewan’s new six per cent sales tax on insurance premiums. More than three-quarters (76 per cent) of respondents disagreed with the move, saying the tax would be significant enough as to discourage employers from offering benefits. The remaining 24 per cent agreed with the move, saying it’s similar to provisions in other provinces and suggesting the tax would have little impact.

Read: Have your say: Do you agree with Saskatchewan’s tax on insurance?

Copyright © 2017 Transcontinental Media G.P. Originally published on benefitscanada.com

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See all comments Recent Comments

Clayton McCann:

What experience does the C.D. Howe institute have in projecting, sucessfully, how the cannabis market has or will behave? Why quote them here?

As for “high prices and excessive regulation of recreational marijuana,” this seems a relative inevitability, with everything being taxed along the distribution chain, from production, to municipal, provincial, and federal taxes, to retail taxation (plus GST!), not to mention fee structures added to processes like child-proof packaging, it will inded be a near-imposibility for the legal gram price to be anywhere near $9/gm.

Then there’s the fact that “the sweet spot” (as your “Staff” writer puts it) is not $9/gm at all, but closer to $8.15. And pardon me for quibbling, but if we’re to have these discussions, and if I’m to “have my say,” I think we should base our discussion on facts and not the imaginary.

Lastly, when was the last time governments showed taxation restraint, in any context whatsoever?

Thursday, August 10 at 11:51 am | Reply

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