GOVERNMENT POLICY – MARIJUANA -

CANADABY: PAUL YOUNG, CPA, CGA

DATE: NOVEMBER 6, 2016

PRESENTATION

• This presentation will discuss both the economic as well as side effects to legalizing marijuana in Canada.

AGENDA• What is Marijuana

• Side effects – Short-Term

• Long-Term

• UN View

• World-Wide effort on Pot

• Cost of implementing the legalization of Marijuana

• Market for Marijuana

• Medical Marijuana Industry

• Final Thoughts

WHAT IS MARIJUANA• What it is and how it is grown

• Cannabis belongs to the genus Cannabis in the family Cannabaceae and includes three species, C. sativa, C. indica, and C. ruderalis, (APG II system). It is typically a dioecious (each individual is either male or female) annual plant (life period: April–September).[1][2][3]

• C. sativa and C. indica generally grow tall (some varieties reach 4 metres, or 13 feet) and their females start the production of flowers rich in tetrahydrocannabinol(THC) (up to 29% by weight) as the season changes from summer to autumn. C. ruderalis is very short, produces only trace amounts of THC, but is very rich in cannabidiol (CBD), which may be 40% of the cannabinoids in a plant and is an antagonist to THC, and it flowers independently of the photoperiod and according to age.[4] However, commercial cross-bred hybrids containing both ruderalis, indica and/or sativa genes exist (usually called autoflowering).

• Fields and/or controlled environment with lights and plants

• Legal view and usage

• Globally, marijuana (cannabis) is the most commonly used illicit drug. Classified as a Schedule 1 controlled substance, marijuana is a mood-altering (psychoactive) drug that affects almost every organ in the body.

• Surveys show that 34.9 percent of 12th graders in the United States use marijuana, and that close to 6 percent of 12th graders report daily use of the drug.

• According to the 2013 National Survey on Drug Use and Health (NSDUH), 19.8 million adults in the U.S. used marijuana in the month prior to being surveyed, and 81 percent of current illicit drug users had used marijuana. (Canada is about 1/9 size as such the users in Canada are likely 2.2 million http://www.medicalnewstoday.com/articles/246392.php

SIDE EFFECTS OF MARIJUANA – SHORT-TERM• Short-term memory problems

• Severe anxiety, including fear that one is being watched or followed (paranoia)

• Very strange behavior, seeing, hearing or smelling things that aren’t there, not being able to tell imagination from reality (psychosis)

• Panic

• Hallucinations

• Loss of sense of personal identity

• Lowered reaction time

• Increased heart rate (risk of heart attack)

• Increased risk of stroke

• Problems with coordination (impairing safe driving or playing sports)

• Sexual problems (for males)

• Up to seven times more likely to contract sexually transmitted infectionsthan non-users (for females) (22,32 & 33)

http://www.drugfreeworld.org/drugfacts/marijuana/short-and-long-term-effects.html

SIDE EFFECTS OF MARIJUANA – LONG-TERM• Decline in IQ (up to 8 points if prolonged use started in adolescent age)

• Poor school performance and higher chance of dropping out

• Impaired thinking and ability to learn and perform complex tasks

• Lower life satisfaction

• Addiction (about 9% of adults and 17% of people who started smoking as teens)

• Potential development of opiate abuse

• Relationship problems, intimate partner violence

• Antisocial behavior including stealing money or lying

• Financial difficulties

• Increased welfare dependence

• Greater chances of being unemployed or not getting good jobs.(33)

http://www.drugfreeworld.org/drugfacts/marijuana/short-and-long-term-effects.html

UN VIEW ON MARIJUANA• Drug treaties are the 1961 Single Convention on Narcotic Drugs, the 1971 Convention on Psychotropic

Substances and the 1988 Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.

• Countries that adopted the 1961 convention, including Canada, agreed to recognize "addiction to narcotic drugs constitutes a serious evil for the individual and is fraught with social and economic danger" and be "conscious of their duty to prevent and combat this evil."

• Canada would join other jurisdictions that have legalized marijuana in ways that violate such treaties, like Uruguay — the first country to pass legislation in favour of legalizing marijuana for commercial and recreational purposes in 2013 — and U.S. states Colorado and Washington.

http://www.cbc.ca/news/health/marijuana-legalization-canada-un-drug-conventions-1.3584148

ENFORCEMENT ON POT• The U.S. war on drugs' symbolic genesis was in 1971, under President Richard Nixon, and Canada has been a supportive ally in this failed

endeavour.

• The war may be coming to an end in the United States, with reforms and rising awareness that it’s not worth the cost to taxpayers. In 2016 alone, 10 states will vote on marijuana liberalization, and the federal government is struggling to push back against state defiance and the weight of both public opinion and economic evidence.

• Senator Kirsten Gillibrand (D-NY) has introduced bipartisan legislation to allow medical marijuana use nationwide, and there’s pending legislation to stop civil asset forfeiture by the Drug Enforcement Administration. Even when it comes to heroin, President Barack Obama this year acknowledged the strain on law enforcement and emphasized funding for treatment and education, as more appropriate responses.

• The same process is in play in Canada, and Prime Minister Justin Trudeau has publicly backedlegalization for marijuana with strict regulation—although hard drugs appear to be outside the Overton Window for the time being.

• What has yet to change, however, is the international front. Even if the strategy runs counter to sentiments and reforms at home, Canadian and U.S. officials continue to crackdown on production and supply chains in neighbouring countries in the Western Hemisphere.

• Trudeau has mentioned that enforcement has not worked. However, if pot is legalized then you will require enforcement of by-laws/laws related to growing of Pot. There is no mentioned of the funding required to enforced by-laws, especially the collection of excise, HST and other taxes from suppliers.

https://www.fraserinstitute.org/blogs/canada-helps-fund-drug-war-abroad-while-eyeing-marijuana-legalization-at-home

COST OF MARIJUANA

• Marijuana legalization can lead to the following issues

• More programs to support addiction (https://www.youtube.com/watch?v=likKBDWyAB4)

• More programs to help the mentally ill

• Drug-testing for employers. Marijuana is like alcohol as such it does impair your ability to operate heavy machinery and equipment.

• Police detect devices for drug impaired drivers. How will drug impaired be charged under the criminal code?

• How will laws be reformed? How long will take it to changed the laws?

• How will the government enforce and collect taxes on marijuana growing operations, i.e. excise taxes, HST, income tax, etc.?

http://www.cbc.ca/news/politics/pot-mclellan-cost-of-legalization-1.3758981

Taxes on legal marijuana could add up to billions of dollars a year, but before that happens Canadians may have to make peace with spending to legalize pot. "People — and I think the provinces, the territories and the government of Canada understand this — do not expect big revenues in the early years," Anne McLellan, the head of Canada's marijuana legalization and regulation task force, told CBC News."In fact, there are going to be up-front costs that governments at all levels are going to have to absorb."

Hint: Any new government program will have sunk costs of front as part of the initial setup. There will be ongoing cost to support the program. It is too early to say what those costs will be to government. It is safe bet to say it will not be a complete windfall for the government when it comes to revenue

MARIJUANA MARKET / SIZE • A legal market for recreational marijuana could give Canada’s economy a boost of up to $22.6 billion annually, says a

new study from business services firm Deloitte.

• The study estimates that marijuana sales, even initially, would be at least as large as hard liquor sales in Canada, at around $5 billion annually, but could be as large as $8.7 billion, making them as large as wine sales.

• The total impact for Canada’s economy from a legal weed market — including growing and distribution, pot paraphernalia, increased tourism and business taxes — would amount to between $12.7 billion to $22.6 billion annually.

• The actual number will depend on how the government decides to regulate marijuana, and what price standards it sets, Deloitte says. Those are decisions the federal Liberals plan to announce next spring.

• Canada's pharmaceutical industry has been lobbying to be admitted to the marijuana game when it's legalized. Shoppers Drug Mart, owned by Loblaw Co., announced earlier this week it has applied to be a medical marijuana distributor, a move likely preceding an expansion into recreational marijuana

http://www.huffingtonpost.ca/2016/10/27/marijuana-legalization-market-size-canada_n_12676754.html

HOW WILL MEDICAL MARIJUANA INDUSTRY BE IMPACTED?

• Medical marijuana industry has been growing in Canada. It is about $5B business annually in Canada.

• How will legalizing marijuana impact that industry?

http://www.canadianmanufacturing.com/operations/canadian-medical-marijuana-firm-keeps-growing-pair-acquisitions-178041/ or http://business.financialpost.com/news/agriculture/canadian-marijuana-stocks-jump-as-liberal-wins-signals-legalization-on-the-table

FINAL THOUGHTS• Marijuana is like alcohol as such should be legalized

• There needs to be a fully costed model including allocation of moneys to mental health, law enforcement, licensing, product quality and other areas. The government should not be treating the marijuana as windfall unless it allocates funds to support all aspect of the program

• The government has to open and transparent with the awarding licensing process from production to distribution/retail.

• The government will need to work with government around to world to support changing the laws for marijuana

• Foreign Aid will need to be review in terms of law enforcement to countries like Mexico, Colombia, Haiti, etc.

• Age limits will need to be set, i.e. 19