On October 17^th, 2018, The Canadian federal government legalized marijuana, or cannabis. Although cannabis was often prescribed for medicinal use, the new legislation means that it is now legal for recreational use, making it a consumer product in much the same way as alcohol or tobacco.

When it comes to legalization, there are 3 categories of use: recreational, medicinal, and cultivation. There are many countries that have partially legalized it, in addition to several states in the USA. Surprisingly, Canada is considered to be late to the party for legalization of recreational use, although we can, however, claim to be one of only 2 countries to have fully legalized cannabis across the board for recreational, medicinal, and cultivation use. Which other country has also fully legalized cannabis, you ask? Uruguay… way back in 2013!

The monetary benefits of cannabis taxation

The move was widely celebrated by Canadians as a move towards more social freedoms. More importantly, there’s even more benefit to be found in the taxation of cannabis, in addition to license fees. Although it’s hard to say how much tax revenue Canada will earn from the cannabis tax, we can take a look at some other governments to get an idea of what Canada stands to earn. For the most meaningful comparison, we turn to our southern neighbours due to similarities in income and standard of living:

These are total sales since the beginning of legalization, and don’t take into account how early or late it occurred. But it does at least give us some insight. The obvious giant is California, although it has a very large population of over 40 million people. It’s interesting to note that legalization only happened at the beginning of this year, on January 1^st, 2018. Since then, the Californian government has taken in $2.75 billion in taxes.

One of our closest neighbors, the state of Washington, legalized several years ago in 2012, so far, the revenues for cannabis taxation has reached over one billion, and it’s growing every year. Just last year in 2017, total taxes and fees from marijuana sales came in at $319 million.

Based on these figures, and on the fact that Canada has similar usage rates comparable to that of California or Washington, we can extrapolate that Canada can potentially generate up to $2 billion in a year of tax revenue just from the sale of recreational marijuana.

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