A new report from the Parliamentary Budget Officer is throwing cold water on the federal government’s expectations for cannabis taxation revenue.

According to the PBO’s estimates, Ottawa stands to generate $175 million in net revenue from cannabis taxes in fiscal 2022-23, that’s $45 million shy of the government’s own estimates.  

While Ottawa has set a $100 million revenue cap on cannabis taxation for the first 24 months after legalization, the PBO said it expects revenue to grow steadily from 2020-21 onward – albeit at a slower pace than the federal government forecast in its last budget.

Ottawa struck a deal with the provinces to split the tax proceeds on recreational cannabis 25/75 after meeting an outcry over plans for an even split.

The PBO said the government’s revenue and market share will be hindered by provincial decisions limiting the size and scope of their retail networks. As a result, the budget watchdog estimates the legal recreational marijuana retailers will only be able to capture about 50 per cent market share.

And the PBO isn’t expecting the legal distribution network to get off the ground as quickly as the feds have promised. The watchdog is making its estimates based on legalization at the beginning of October, well past Ottawa’s pledge to enact legislation this summer.