OTTAWA—Legalized pot will cost Canadians about $10 a gram and Ottawa has agreed to give the provinces 75 per cent of the tax revenues to help cover costs of setting up the new regime.

The agreement on the 75-25 tax revenue split came Monday during a meeting between federal Finance Minister Bill Morneau and his provincial counterparts.

The ministers pegged the cost at about $10 a gram. Each gram of marijuana would have a tax of $1 on sales up to $10 and a 10-per-cent tax on sales worth more than $10.

Read more: Provinces to get 75 per cent share of pot tax revenues, Bill Morneau says

“Our expectation is that, by keeping prices low, we will be able to get rid of the black market. However that will happen over time,” Morneau said.

Ontario Finance Minister Charles Sousa said the price could be even less than $10 a gram as governments try to squeeze out the illegal market. “It’s important for us to be responsive to the marketplace,” he said.

The federal government in October had proposed a 50-50 split, a formula that prompted much grumbling among the provinces.

But even with the richer cost-sharing agreement, provincial ministers were quick to warn that no level of government will be getting rich from Ottawa’s move to legalize cannabis, due to take effect July 1.

In fact, they all warned that the costs of setting up the system to sell legalized recreational pot will far outweigh the tax revenues, estimated to be about $400 million a year in the early years. The federal government pegged its costs so far at $700 million and municipalities estimate their costs at between $210 million and $335 million a year.

“Our priority is not revenue. It’s not profit. Our priority is to get off the ground and get out of the gate in a smooth transition to a new market where we’ve not been before,” said Cathy Rogers, New Brunswick’s finance minister.

Sousa said Ottawa and the provinces are attempting to learn the lessons of other jurisdictions where cannabis has already been legalized and ensure that investments in policing and public health are made upfront.

“We are investing quite a bit of money in those issues,” Sousa said. “But going forward, we know there is demand for cannabis. Quite a bit.” He predicted that tax revenues will grow “quite substantively.”

Under the revenue-sharing agreement, which will be in force for two years, the federal share will be capped at $100 million, meaning any additional tax revenues will go to the provinces and territories.

Morneau said it would be up to the provinces in turn to decide how much to give municipalities, which last week demanded a one-third share.

Sousa told the Star after the meeting that he is aware of the needs of Ontario’s towns and cities.

“I need the municipalities not to be out of pocket on this stuff, so I’m concerned to make sure that they also have recovery. I’m working with them to ensure that those costs ... are recovered,” Sousa said.

At their meeting, finance ministers also talked about the need to make changes to crack down on tax evasion measures, as exposed during recent Panama Papers and Paradise Papers exposés.

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“We know there are some individuals who are moving money overseas to a country avoiding taxation or worse, to launder money or partake in terrorist financing,” Morneau said.

He said the finance ministers agreed that action was needed to better know the actual owners of companies.

“We need to be able to see into companies to know who actually owns those companies,” he said.

“We agreed to take concrete steps to ensure that we have knowledge of who owns companies across our country so that we can do a better job at ensuring that we don’t have tax evasion. We don’t have money laundering,” he said.