Manitoba's New 'Social Responsibility Fee' Could Keep The Black Market For Marijuana In Business

Taxing cannabis sales to raise funds for community projects seems like a good idea, but over-taxation could keep the black market for marijuana in business. And that possibility is becoming more likely in Manitoba due to a new 'social responsibility fee.'

The Manitoba government announced that social responsibility fee (SRF) to be levied on legal cannabis retailers. The SRF will begin in 2019 and will require retailers to hand over 6 percent of their total annual revenues to the provincial government. The money collected will be used to fund cannabis health, safety, education and enforcement programs in Manitoba.

While this sounds like a reasonable program in theory, some people in the industry are concerned the additional fee could raise the cost of legal cannabis too high to compete with the black market.

"Taxes always have an impact," Gary Symons - Director of Communications for the licensed marijuana grower Delta 9 Cannabis - told the Winnipeg Sun. "I think what people are most concerned about is that prices get pushed up to the point where it is difficult to compete with the black market. Prices for illegal cannabis are falling, there’s literally a blowout sale going on in Canada right now. That’s the market we are competing in."

The Manitoba government, however has indicated that the tax rates were set at a level they believe will ensure the legal market stays competitive.

"The fee has been evaluated with the goal of keeping consumer prices low, as we work towards eliminating the illegal market in Manitoba," a government spokesperson said on Friday.

But the black market in Manitoba is also altering prices in order to stay competitive, according to activist Steven Stairs. 

“The black market is dealing with a profit margin reduction," he told the Sun. "They’ve dropped their prices to compete.”

So without careful consideration the Canadian market could face either over-saturation problems such as the ones seen in Oregon, or over-taxation. Both of which could contribute to the continuation of the illicit cannabis markets.

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