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Feds, provinces cautiously optimistic they can reach revenue sharing deal on pot

Last Updated Dec 11, 2017 at 2:19 pm EDT

Growing flowers of cannabis intended for the medical marijuana market are shown at OrganiGram in Moncton, N.B., on April 14, 2016. THE CANADIAN PRESS/Ron Ward

The country’s finance ministers are cautiously optimistic a deal can be reached Monday on how to divvy up the tax proceeds from the eventual sale of legalized marijuana.

Provincial and territorial finance ministers met in Ottawa for a second day to discuss a range of issues — but the dominant topic has been negotiations on how they will share revenue from a federal excise tax on recreational cannabis.

On his way to the meeting Monday, Ontario Finance Minister Charles Sousa said the federal Liberal government argued at a working dinner Sunday night that it, too, will have costs. Ottawa also showed flexibility on revenue and cost-sharing issues, he added.

“I’d suspect there are a couple of provinces that are still holding out … They don’t want to find themselves caught in a position for the next two years where they’re underwater — nobody wants to be in that position,” Sousa said.

“But I think we’re getting pretty close.”

Part of the negotiations have been centred on the Trudeau government’s proposal to impose a cannabis excise tax of $1 per gram or 10 per cent of the final retail price, whichever is higher.

An initial federal offer of a 50-50 split with the provinces and territories was flatly rejected. The provinces and territories say they will face added expenses such as public-awareness campaigns, extra policing, busier court systems and increased road safety efforts.

Ottawa has since said it’s prepared to go further — as long as some of that extra cash goes to cities. The Federation of Canadian Municipalities wants a third of the revenues earmarked to help municipal governments handle administrative and policing costs.

Federal Finance Minister Bill Morneau said Monday he thinks a reasonable compromise can be reached on how to share a source of tax revenue that Ottawa has estimated could eventually climb to $1 billion per year.

“From a number of provinces, I had a clear sense that they were onboard and ready to move forward,” Morneau said on his way to the meeting.

“Like any negotiations, there’s going to be back and forth. I think we’re making progress.”

On Sunday, Morneau was expected to counter the argument that Ottawa won’t see the same level of costs associated with legalization by telling his counterparts he has already committed more than $1 billion over five years towards pot legalization in areas like policing and border security.

Quebec Finance Minister Carlos Leitao said Monday that the federal government made it clear Sunday it will also have costs. But he noted the plan to legalize pot came from Ottawa.

“It’s the federal government that decided to go in this direction,” Leitao said.

He added that his objective is to leave Ottawa with an agreement and he was hopeful a “co-ordinated Canadian approach” can be designed to ensure the governments eliminate the black market.

When asked about the federal push to ensure enough money goes to cities and towns, Leitao said each province will do it their own way.

“Of course, the provinces will work with their municipalities, but it’s for us to decide what that percentage will be,” he said.

“And every province is different, every city is different, so there is no preconceived amount for the provinces.”

During the meetings, the ministers will also discuss the federal government’s proposed tweaks to the formula behind equalization payments, as well as the three-year review of the Canada Pension Plan. They will also explore the state of the global economy and listen to a presentation by Bank of Canada governor Stephen Poloz.

Talks are also expected to resume on a national strategy to improve the sharing of information on corporate ownership between jurisdictions, a measure designed to clamp down on tax avoidance, tax evasion, money laundering and terrorist financing.

With files from Terry Pedwell