Buried underneath the pomp and circumstance of Prime Minister Justin Trudeau’s grand plan to legalize recreational weed, is an angry faction — one that feels the government is playing favourites, granting cannabis companies the kind of leniency this particular industry hasn’t experienced in decades.
It is perhaps an overstatement to say that Big Tobacco is unhappy with weed becoming legal — after all, they claim that marijuana isn’t a substance that can act as a substitute for tobacco consumption. But tobacco firms are certainly peeved by the way the government is going about the legalization process.
“We do not understand why the same principle, of a low tax for marijuana, is not being applied to tobacco,” said Jorge Araya, President and CEO of Imperial Tobacco Canada. “Right now, 70 percent of the price of a cigarette goes to the government. It’s absolutely draconian.”
The Tax Differential
Last week, the Liberal government proposed a federal tax of just $1 on marijuana sales worth less than $10, and ten percent tax on sales worth more than $10.
Ontario Finance Minister Charles Sousa recently hinted that the price of a gram of marijuana would be approximately $10. That would effectively mean just a 10 percent tax on a gram of weed if provinces don’t impose additional levies.
By contrast, a carton of 200 cigarettes costs approximately $100 in Ontario — taxes from provincial, national and local government represent 66 percent of that cost.
The government says its priority is to keep legal weed at a price that is competitive with the black market in order to encourage consumers to purchase marijuana legally. Araya, the tobacco executive, acknowledges the potential efficacy of this policy, but he claims that the hypocrisy lies in the fact that there is a thriving contraband market for cigarettes that