Canada: the sale price of cannabis, an issue at the heart of legalization

Before the cannabis legalization For the law to take effect in Canada, authorities will need to set the retail price and taxes on the sale, production, and distribution of cannabis. This is a pressing issue that the provinces will need to resolve by July 2018.

The Canadian government presented its bill to legalize cannabis April 13, 2017. As the bill is being reviewed, Ottawa is recommending that each province set a minimum retail price for recreational cannabis. Local authorities will have to balance the price proposed by legal distributors and the dealers premises.

Cut the ground from under the traffickers' feet

The main reason cited by the Canadian government for legalizing cannabis is to «counter the criminal networks that control the recreational cannabis market.» To achieve this, dispensaries or coffeeshops will need to offer lower prices and higher quality than the product sold on the street. A complex equation that the working group on cannabis legalization had put forward in last November : »Taxes should be high enough to discourage excessive consumption but low enough to compete effectively with the black market.».

In Canada, the average price per gram of weed is 8.32$le grammes, according to Radio-Canada. However, this price varies from province to province. In Quebec, for example, a bag costs an average of 7.31 $ per gram. Parliamentary Budget Officer Jean Denis Fréchette states: »8.40$ would be the equilibrium price for the government to capture the largest share of the black market.».

According to a study conducted by Lift at various dispensaries across Canada, the average retail price of the The price of medical cannabis is $10 and a little less on the online stores of legal retailers.

Lessons to Be Learned from the U.S. States

The various U.S. states that have adopted a legal system for the production and distribution of cannabis can serve as examples from which to learn how to effectively set the price of cannabis.

Limiting self-production

Colorado's legal market is grappling with the «gray» market—a market where production is carried out legally by private individuals but ends up on the street without any taxes being paid. To address this persistent problem, Colorado has recently attacked to private home gardens. Authorities had difficulty proving that a 99-foot garden was being used for purposes other than personal or medical use. Canada seems to have struck the right balance by allowing four home-grown cannabis plants per household.

Tax System

Most states that have legalized cannabis have implemented a flat tax of 50$ on each ounce sold wholesale. They have since adjusted their tax rates based on the products’ selling price and THC concentration. Only the state of Washington had tied all taxes to the sale price. Tax revenues plummeted following the dramatic drop in prices in 2016.

Fall in prices

Even though the government is issuing production licenses very sparingly, the average price of cannabis is expected to fall after legalization. Licensed producers are already working to expand their cultivation areas and reduce the production cost per plant. Average prices for recreational cannabis have all lowered this year in the states of Colorado, Washington, and Oregon. Canada wants to keep prices high to discourage consumption.

Quality Control

Aualité is synonymous with complete transparency regarding the products used in cannabis production. Health Canada already maintains a list of prohibited substances and the maximum permitted concentration of those substances in a cannabis plant. Canadian producers Organigram and Mettrum had previously been forced to recall entire batches of medical cannabis. In this case, the federal government in Ottawa is inviting the provinces to decide which laboratories will verify the quality of recreational cannabis. Each time a batch of cannabis goes through a certification company, its selling price will increase.