VANCOUVER — To tax or not to tax — that is the unanswered question now that Vancouver City Council has decided to regulate its marijuana dispensaries.

Various levels of government are finding themselves in an awkward situation as they determine whether to impose taxation on the businesses — and thereby confer further legitimacy on a commercial activity related to cannabis.

According to Canada’s Controlled Drugs and Substances Act, cannabis possession remains a federal offence unless it is for medicinal use and the user has a doctor’s prescription.

Vancouver’s decision with respect to regulation deals only with the city government’s own powers, including authority to collect business licence fees of $30,000 per dispensary. But where tax policy is concerned, the municipal move leaves only giant question marks.

The province has been cautious in its posture, with Health Minister Terry Lake last spring approving the city’s action: “They are just operating in the interests of their citizens and at least putting some regulatory framework in their city and, as our public health officers have said, they are doing it for the right reasons.”

Federal Health Minister Rona Ambrose, meanwhile, is in a fury, insisting cannabis outlets are criminal establishments and urging police to enforce the law by shutting them down.

Her position makes it pretty difficult for Ottawa to turn around and tax the dispensaries. Taxation surely would amount to tacit acceptance of commercial trade in an illegal substance.

Government authorities obviously do not collect taxes on the trade in stolen goods, under-the-table transactions, or prostitution. So, how likely is it they would now seek to tax cannabis sales?

When I put the question recently to the folks at the federal finance ministry, I was referred to the health ministry. Michael Bolkenius, a spokesman for Ambrose, issued the following statement: “Storefronts selling marijuana are illegal and, under our government, will remain illegal. We expect the police to enforce the law.”

Of course, with a federal election taking place Oct. 19, Bolkenius added, the Conservative government’s posture was “unlike (that of) Justin Trudeau who wants to make smoking marijuana a normal, everyday activity for Canadians.”

The province is being equally obfuscatory. Finance spokesman Jamie Edwardson said: “Businesses that sell items that are subject to PST would need to collect and remit PST, unless specific exemptions apply. If the business has taxable income, they would be subject to corporate income tax.”

So, have the pot dispensaries been remitting PST and corporate tax to the B.C. government?

Edwardson responded that confidentiality requirements regarding who in B.C. has paid their taxes precludes him from saying.

Dana Larsen, director of the Medical Cannabis Dispensary in Vancouver and founder and director of Sensible B.C. which lobbies for pot legalization, reports: “Some of the dispensaries do charge and remit GST, while others do not.

“Some may charge PST too, though I don’t think most do that.”

Larsen also noted, “every dispensary operator I am familiar with files all required business taxes, as far as I know.”

Larsen believes taxation oversight will eventually come, now that municipal bylaws to regulate the dispensaries have been put in place.

One of the principal arguments for legalizing marijuana — apart from the fact prohibition has not been effective — is that, if people are going to use it, society can at least benefit from applicable taxes that stand to flow from the cultivation and sale of pot.

In Colorado, where the substance has been made legal (as in Washington state, Oregon and Alaska), the state last year collected $44 million in taxes from its cannabis enterprise.

In Vancouver, we appear to have developed a system to date that features only the downsides of permitting pot use.

We have a bunch of odiferous cannabis dispensaries that now are allowed to operate in our midst, without any clear rules about the safety of the stuff being sold, or a framework to ensure that buyers and sellers pay their fair share of taxes.

byaffe@vancouversun.com

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