November 10, 2017 / 9:15 PM / a year ago

UPDATE 2-Canada proposes splitting pot tax, draws ire from Ontario

(Adds reaction from Ontario, details, share prices)

By Leah Schnurr

OTTAWA, Nov 10 (Reuters) - Canada’s federal government proposed on Friday that it split equally the income from excise taxes on recreational marijuana with the provinces where it will be sold when it is legalized next year, drawing criticism from Ontario.

The federal government said it wants an excise tax on all cannabis products of C$1 (79 cents) per gram (0.04 ounce), or 10 percent of the retail price, whichever is higher. Excise taxes are paid by manufacturers.

Consumers would be levied federal and provincial sales taxes, which could boost the final price of marijuana by up to 15 percent, depending on the province.

“The federal proposal to share revenue 50-50 is not reasonable or sufficient,” said Jessica Martin, spokeswoman for Ontario Finance Minister Charles Sousa. “The transition to a legalized and regulated system will come with significant incremental costs to the province.”

Prime Minister Justin Trudeau’s Liberal government wants to allow recreational marijuana across the entire country by July 2018, making it the first Group of Seven country to do so. But it has left many of the details, including how it will be sold, up to the provinces.

Federal and provincial authorities want the total cost of a cannabis product to be low enough to discourage people from the illegal market.

Marijuana producers’ shares rose as the plan was similar to one Trudeau outlined last month. Canopy Growth Co rose 2.7 percent to C$19.88, while Aphria Inc was up 3.7 percent at C$8.49.

Some provinces have expressed concern about how much it will cost to implement and supervise the new market, laying the groundwork for a potential conflict between the two levels of government.

Ontario, Canada’s most populous province, said each province needs to have the flexibility to support its own distribution system.

Canada’s federal and provincial finance ministers are set to discuss legalization of pot at a meeting next month in Ottawa.

Member of Parliament Bill Blair, the government’s point person on marijuana legalization, said total tax revenue could be as much as around C$1 billion, though he said that was a very high estimate and will depend on how big the market is.

Trudeau promised in his 2015 election campaign to legalize marijuana, saying it would keep the drug out of the hands of underage users and reduce related crime.

However, opposition has been brewing among some in the Canadian Senate, which could put quick passage of the law in jeopardy.

$1 = $1.27 Canadian Reporting by Leah Schnurr; Editing by Jim Finkle and Diane Craft

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