Let’s Start Clearing the Smoke on Cannabis

In another 12 months, we’ll be dealing with the real world impact of the federal government’s legalization of marijuana. There are still lots of unanswered questions about how this will roll out. These are questions with huge economic and social implications.

While the Canadian Federation of Independent Business (CFIB) has conducted only one survey of its members so far on how recreational marijuana should be sold, comments from our members suggest there are still considerable divisions on whether legalizing marijuana is even a good idea.

While we have limited experience with cannabis per se, CFIB is a respected international leader on regulation, including how to get it right and what not to do. This includes considerable experience with liquor and tobacco regulation. The federal government has handed responsibility over to the provinces who will need to apply a laser focus on these key critical regulatory pieces.

Too often, governments examine a new area where regulation is needed and quickly expand the mandate to include every moving part. This automatically means proper enforcement is near impossible. We recommend focusing on a few critical regulatory priorities, such as preventing sales to minors, ensuring proper product safety information and rules, and prohibitions at work or while driving. Choose the most important aspects to regulate and then do them well. Leave the rest alone.

We also hope to see the same rules across the country. The provinces should be working together to ensure as much consistency as possible as legalization rolls out across the country.  As the new Canadian Free Trade Agreement works to undo the damage of multiple complicated regulatory schemes, the last thing we need is another patchwork quilt of rules in an emerging industry.

Additionally, while bringing recreational cannabis sales out of the underground economy will no doubt have positive revenue implications for the government (excise, sales, and corporate income taxes), there will be added costs for policing and health care. Government would be wise to resist the temptation to frame this as a giant cash cow.

That means getting the tax mix right. If taxes are excessive, particularly in early days, much of it will remain black market. High tax rates may discourage users, but they’ll also push sales into the underground economy. It is estimated that close to a third of tobacco sales are underground, often with links to organized crime.

Also, provinces would be wise not to let regulation get in the way of innovation. An above-ground private sector can stay much closer to customer preferences, the edibles market is a good example. It’s also a myth that only public sector employees can responsibly handle controlled substances. The private sector has held an important role in tobacco and pharmaceutical sales, as well as alcohol in some provinces.

CFIB is also recommending a central role for smaller, independent businesses within this emerging industry. We are already advocating for access to banking and payments services for smaller, independent businesses involved in legal cannabis retail and distribution as a measure to help achieve the goal of limiting the underground economy.

Even those who are involved in the emerging industry appear to remain unsure of where this is all going. A year out from implementation, we should be seeing some of the smoke begin to clear.

Jordi Morgan is Vice President, Atlantic of the Canadian Federation of Independent Business. CFIB represents the interests of 11,000 small and medium size businesses in Atlantic Canada.

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