The Manitoba NDP’s Finance Critic wants to know where the province has spent the money received from legalization. The province says it intends to sign on to the Federal-Provincial-Territorial Agreement on Cannabis Taxation.
In a back-and-forth during a House debate on April 18, Adrien Sala, the Finance Critic for the Official Opposition, repeatedly asked the Minister of Finance, Cliff Cullen, to explain where the approximately $18 million the government has collected over the last few years of legalization has been allocated.
The exchange came about during the second reading debate of the government’s bill to repeal the 6% social responsibility fee it charges retailers, and a day after the Manitoba NDP said they want to take a “close look” at the province’s private retail cannabis program if they form government following an upcoming election this fall.
The province’s initial promise was for these fees to be invested back into social responsibility issues relating to the social impact of legalization.
The provincial government now maintains that the social costs of legalization have stabilized, justifying the repeal of this fee. The opposition, who support the measure overall, has taken the government to task about how they have actually directed those funds.
So, could the minister please offer information–I’ve asked him about this year, related to the $10 million that were collected. We know $8 million was collected in the last fiscal. Can he share how much of those $8 million were invested in social responsibility-related items?
Adrien Sala, the Finance Critic for the Official Opposition
In response, however, Minister Cullen was unable to provide specifics of how these funds specifically addressed any concerns related to the social costs of legal cannabis. In addition, he failed to respond to Sala’s question about where the province’s own application of GST has been allocated. In both instances, the Minister could only refer to the funds going back to general revenue.
“The minister has failed to be able to offer up even a single example of how those funds are being spent. So I would like the minister, as the Minister of Finance (Mr. Cullen), to clarify for the House: What happens to the remainder of those funds that were collected from small Manitoban businesses? Have they gone back and have been applied toward general revenue? Where have those dollars gone?”
Adrien SAla, Finance Critic for the Official Opposition
Yes, that money goes back to general revenue so that we can make a record and historic investment in health care. I reflect on the $668 million in health care to deal with some of the challenges we’re facing in the health-care front. I also point to record investments in mental health and addictions, and increased programming that we’ve brought forward in this year’s budget. That money can be used for those goods and services as well. So that money is going back into general revenue that can be used for programming for Manitobans facing addictions and other mental health challenges.
Manitoba Minister of Finance Cliff Cullen
Cullen also told Sala that the government had set aside funds to “mitigate some of the damages that could occur” from legalization, but admitted that they “didn’t see as many broad repercussions of cannabis, once it was legalized, as we thought might occur.”
In response for further clarification on how this funding is being spent, a spokesperson for the agency could only tell StratCann that Manitoba Liquor & Lotteries (MBLL) collects the social responsibility fee (SRF) on behalf of the province, deducting an amount of LGCA cannabis related regulatory costs.
In 2021 the cannabis regulatory cost for the Liquor, Gaming and Cannabis Authority of Manitoba (LGCA) was $940,718.04. Net payment to the province:
- 2019 was $2,985,480.28
- 2020 was $5,579,921.13
- 2021 was $7,779,057.71
The MBLL had a net income total allocation to the province from cannabis sales of about $14 million in 2020/2021 and about $24 million in 2021/2022. It’s on track to more than double that figure again for 2023, based on the past three quarterly reports.
“The social responsibility fees collected and remitted to the government go into general revenue and are used to mitigate the social costs associated with cannabis legalization like increased health costs, public education and addiction services,” added the spokesperson. “After four years of legislation, the cannabis market has matured, and the costs to the province have stabilized, opening the possibility of repealing the Social Responsibility Fee.”
“In addition, the province intends to sign on to the Federal-Provincial-Territorial Agreement on Cannabis Taxation and is actively engaged with our Federal counterparts on Manitoba’s participation in the agreement. Further details will be made to the public when available.”
Cullen also noted in the House debate that the Manitoba government is looking to sign an agreement with the federal government to collect their 75% share of the federal excise tax on cannabis. The province was the only one to opt out of the initial agreement that saw 75% of every dollar collected from federal taxes directed back to the provinces. Cullen shared that the federal government is currently “tweaking” its excise tax framework.
A lot of other jurisdictions are moving into agreements with the federal government. That is where we’re proposing to go as well. Then there would be–once we get to sign that agreement, there would be probably 75 cents coming back to the Province of Manitoba. So we’re having discussions with the federal government on the excise tax component. The federal government is currently tweaking the rules around that, so we’re allowing them to go through their process before we sign an agreement with them.
Manitoba Minister of Finance Cliff Cullen.
The MBLL also collects a 75-cents-per-gram tax that goes to Manitoba Liquor & Lotteries. In 2021/22, Cannabis Operations earned a comprehensive income of $24.6 million, an increase of $10.5 million or 74.5% from the $14.1 million earned in the prior year.
Revenue generated by the MBLL’s cannabis operations was $113.9 million in 2021/22, an increase of $33.7 million or 42.0% from revenue of $80.2 million in the prior year.
In the lead-up to legalization, provinces and munis argued they would see a significant economic impact from legalization, leading to provinces collecting 75% of the federal excise tax. While munis have asked for this money, most provinces did not commit to sharing it directly.
Retailers also pay an additional nine percent fee for the province’s management of the distribution of cannabis from growers to sellers. The province primarily takes a hands-off approach to distribution but oversees sales into the provinces and manages a cross-docking system.
The government has also said they are working on a plan to create a “craft cannabis framework designed to promote and support the development of smaller scale, artisanal cannabis micro producers.”
The Standing Committee on Social and Economic Development will meet on Wednesday, May 10th, 2023, at 6 p.m. to consider Bill 10, The Liquor, Gaming and Cannabis Control Amendment Act (Social Responsibility Fee Repealed).
