TORONTO — Recreational marijuana isn't expected to turn a profit for the Ontario government this year, the province's finance minister said Wednesday, noting that there would be no projections for pot revenues or profits in the upcoming spring budget.
Ontario is working on opening standalone stores to sell recreational marijuana once the drug is legalized this summer.
Finance Minister Charles Sousa said the cost to set up the stores and a distribution system, crack down on the illicit market and the need to keep prices for the product low will likely limit the province's ability to make money on legal weed in the near future.
"I don't foresee having a net revenue from this," he said. "I have not put forward any projections in terms of what the revenues will be or the dividends will be from cannabis retailing in the coming years. I want to first see how it evolves and be more determined in terms of what that revenue will look like."
In December, the federal government agreed to give the provinces and territories a 75 per cent share of tax revenues from the sale of legalized marijuana. Sousa said the excise tax will be used to offset the start-up costs for the province's retail stores and other activities around legalization.
"That won't be enough to cover out outlays and our expenses," he said of the tax revenue. "We're still going to be under water."
The government will know better two years after legalization if recreational cannabis sales can be a money maker for the province, Sousa said.
Sousa acknowledged there is a range of opinion on the prospects of profits from recreational marijuana sales, including some critics of the government's approach who suggest pot sales will be lucrative. Until the government knows what the market is like in Ontario the province must take a wait-and-see approach, he said.
"We know that LCBO and our gaming and some other agencies that we have are huge contributors to our dividends," he said. "We'll see if cannabis retail will be the same way. We're playing it safe."
Under rules outlined in the fall, the province intends to sell marijuana in up to 150 stores run by the Liquor Control Board of Ontario to people 19 and older, with a ban on pot's consumption in public spaces or workplaces.