Daily Management Review

Canada legalizes cannabis; tax profits expected to increase


10/18/2018


A federal law on the legalization of cannabis for recreational purposes entered into force on Wednesday in Canada.



GoToVan via flickr
GoToVan via flickr
In fact, Canada became the first state from the G7 and the second country in the world after Uruguay (legalized in 2013), which transferred this light drug to the legal field, allowing its sale, storage and cultivation.

In late June, the Government of Canada approved a bill on legalization of cannabis for recreational purposes. As Canadian Prime Minister Justin Trudeau said then, the use of this drug should be legal from October 17.

It is worth noting that it was the promise of legalization that allowed Trudeau to win by a large margin in the 2015 elections, as he thus attracted the attention of young voters. According to government estimates, Canadians will spend at least $ 1 billion on pot plants in the fourth quarter of this year, when cannabis use is legalized.

Against the background of the growing popularity of cannabis, the companies involved in its legal production are also going up. They attract increasingly more investors from among millennials as well. Thus, the Canadian Tilray has jumped by 179% in the last month alone. At the same time, the SEC has already warned investors to be wary of scammers.

However, immediately after the law came into force, capitalization of key players in the Cannabis market in Canada slipped. According to analysts, this is due to the fact that recently the shares of these companies have shown strong growth and many investors have chosen to take profits on the very fact of legalization. Shares of Aphria Inc. increased by 4%, while the capitalization of Aurora Cannabis, Tilray Inc., Cronos, Canopy Growth Corp. slipped in the range from 1% to 4%.

Cannabis consumption per capita in Canada is higher than in the United States. According to forecasts of the analytical company New Frontier, by 2025 Canada’s cannabis market will have reached almost $ 6 billion. Moreover, the new legislation allows Canadian companies to export their products, which creates additional prospects for this market.

According to forecasts of the federal government, the treasury’s revenues from the sale of cannabis will be at least $ 400 million per year in tax revenues. 25% of the sales tax will be sent to the federal budget up to an annual limit of $ 100 million, the rest will go to the provinces, which in turn will provide additional funding to cities and municipalities.

source: bloomberg.com






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