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Canada’s Budget Office Estimates Cannabis Market Worth Hundreds of Millions During Flagship Year

According to Canada’s Parliamentary Budget Office, sales tax revenues from legal cannabis could be between $356 million and $959 million once the drug is legalized nationwide, as is expected this spring. The figures are based on legal per gram prices between $7.48 and $9.34 with only federal and provincial sales tax applied.

Parliamentary Budget Officer Jean-Denis Fréchette notes that the office expects the revenues to, eventually, climb into the billions of dollars and that the new sector will create both new revenues and expenses for the government.

“Different products, such as edibles and concentrates, may require entirely different approaches to taxation,” the report states. “These variations, along with others, each have different implications for market incentives and fiscal revenues.”

The PBO projects that in 2018 — the likely first year of legal sales — Canadians will consume between 378 and 1,017 metric tons of cannabis and that the legal market will be largely driven by individuals who consume the drug daily or weekly. The office suggests that between 3.4 million and 6 million Canadians will consume cannabis at least once after it is legalized nationally.

“Ultimately, no one knows exactly how legalization will impact the cannabis market — in particular, how use patterns will evolve, especially among frequent or youth consumers; how illicit and legal market prices will respond; the extent to which Canadians will participate in the recreational, medical and illicit markets; or how consumer tastes and product offerings, including value-added products, will change,” the report says.

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