News
Canada's cannabis policy makes it an international rebel on drug treaties – CBC.ca
While many Canadians have focused on the supply problems and overly optimistic business projections that have marred Ottawa’s marijuana legalization project, it’s also left behind some international loose ends that still haven’t been tied up.
Not all other countries have accepted Canada’s right to forge a new path on cannabis law. And the ending of Canada’s 95-year ban on cannabis appears to have accelerated the demise of a worldwide consensus and treaty regime that, for decades, underpinned the global war on drugs.
A year after legalization, Canada remains in flagrant violation of UN drug treaties that it signed — an uncomfortable situation for a country that likes to see itself as a stickler for international laws and treaties.
“The Government of Canada has contributed to weakening the international legal drug control framework and undermining the rules-based international order,” says the UN’s International Narcotics Control Board (INCB).
On Dec. 13, INCB President Cornelis de Joncheere reminded nations that the UN “has repeatedly and publicly spoken out that these (legalization laws) are in violation of the obligations under the conventions.”
Bolivian manoeuvres
A heavily-redacted memo that appears to have been signed by Ian Shugart as deputy minister of Foreign Affairs in March — just a month before cannabis became legal — discusses “withdrawing Canada’s objections to treaty actions by Bolivia under the Single Convention on Narcotic Drugs, 1961, in advance of the entry into force of the Cannabis Act.”
When Bolivia tried to join the convention in the 1980s, it faced a dilemma. Those were the boom days of the cocaine trade and the coca plantations of South America were seen as the source of the scourge. But the people of the Andean nations had been chewing coca leaves for generations, so Bolivia negotiated a 25-year exemption for coca leaf.
As the 25 year deadline loomed, the government of former coca farmer Evo Morales tried to persuade other countries to change the treaty.
Other signatories weren’t willing to change the convention, and the Bolivians weren’t willing to ban coca leaf, so in 2012 they decided on a bold stroke: Bolivia would crash out of the three international drug treaties and then apply to re-enter with its own permanent exemption for coca leaf, now enshrined in a new Bolivian constitution as part of the nation’s Indigenous heritage.
Canada says no
The move was opposed by the US, already deeply suspicious of the leftist president who had banned the Drug Enforcement Administration from his country four years earlier. But objections also came from some of the world’s most progressive countries on drug policy — such as Portugal and the Netherlands — who saw it as a bad-faith way to get around the treaty that would set a dangerous precedent.
“Canada was among a group of 18 states parties to that convention that did not support Bolivia’s proposal at that time,” said Guillaume Berubé of Global Affairs Canada.
But Bolivia had studied the UN rules carefully, and knew its opponents would be unlikely to get one-third of treaty members to raise a protest. Without that, the objections would not stand. And so, by 2013, Bolivia was back in the treaties, now with a permanent exemption for coca leaf.
Today, Canada finds itself in much the same position Bolivia did in 2012 — openly violating the treaties it signed. Its Bolivian objection now looks like hypocrisy.
In the end, said Berubé, Ottawa never formally withdrew its objection.
Bolivia “was successful in re-acceding with a reservation to certain obligations to permit traditional coca leaf practices in its territory. With that step by Bolivia, no further action has been required by states parties with respect to the matter.”
And yet, as the redacted memo shows, Canada was still debating at the highest levels whether to formally withdraw that objection years after Bolivia’s actions.
John Walsh of the Washington Office on Latin America testified as an expert before the Senate committee that examined the international effects of Canada’s legalization plan.
“They’re interested in finding a solution that reconciles their domestic policy changes — from which they’re not retreating — with their international treaty obligations,” he said. “Getting to that point is the not-easy part.”
Russians lead the charge
Walsh said Canada is facing steady pressure from other signatories to the drug treaties, particularly Russia.
“”For Russia, it’s a tantalizing opportunity not just to bash Canada but to call the West on its hypocrisy on the rules-based international order, and sow divisions among the West, which it sees as antagonistic and oppressive of its interests,” Walsh told CBC News.
“I think they take some glee in being able to point to Canada and say, ‘The West seeks to impose this rules-based order on us, but when it comes to following their own obligations, they’re à la carte, which is contrary to what international law requires.'”
Russia and Japan led the objections earlier this year when Canada and Uruguay joined a World Health Organization-supported initiative to downgrade cannabis from its Schedule IV classification.
“Because the US has sidelined itself on this issue, Russia sees itself as stepping into the void and has been able to rally a lot of like-minded prohibitionist countries in Africa and Asia,” Walsh said.
Opening Pandora’s box
Russia’s objections may have something to do with scoring points — but they also reflect the country’s very different approach to drug policy.
“The new drug policy of Ottawa contradicts the 1969 Vienna Convention on the Law of Treaties,” Vasily Kutlyshev told CBC News on behalf of Russia’s foreign ministry. Under that convention, he said, “the Canadian side is obliged to perform in good faith its international legal obligations and has no right to invoke its internal legislation as a justification for its failure to perform the international treaty.”
Deputy Prime Minister Chrystia Freeland has acknowledged that the new cannabis law does selectively violate the treaties, although Berube said the approach “is consistent with the overarching goals of the UN drug conventions, namely to protect the health and safety of citizens.”
The Russians aren’t buying that argument.
“The decision adopted by Canada in fact opens the ‘Pandora box’ by introducing [a] selective approach toward the implementation of the UN drug control conventions,” Kutlyshev said.
“There exists real danger that some other countries may follow the example set by Canada, which would lead to the erosion and even dismantling of the whole international legal foundation of our fight against narcotic drugs.”
Legalization spreads
That fear seems to be coming true —at least in the Western Hemisphere, where courts and governments are chipping away at the architecture of prohibition.
“Someone has to go first,” Uruguay’s President José Mujica said in 2013, when his country led the way by fully legalizing marijuana.
In the U.S., marijuana is now fully legal in 11 states and fully illegal in only 10, with medical exemptions or decriminalization statutes in the rest.
Several years ago, Walsh said, Canada could have expected intense pressure from Washington not to legalize — but the U.S. has given up its role as world policeman of drug enforcement.
“The International Narcotics Control Board already sees the U.S. as out of compliance,” he said. “Because of the outsized role of the U.S. in insisting on enforcement of the drug treaties, everybody understands the significance of the fact that the U.S. is now sidelined from bludgeoning back against Canada.”
Meanwhile, a growing number of Mexicans are asking why their army continues to uproot plants that are now legal right across the border.
Mexico has not legalized like Uruguay or Canada; it drew the line at decriminalization of personal possession. But it has gone further by applying that decriminalization of personal possession to other drugs, such as cocaine (0.5 grams), heroin (50 milligrams) and methamphetamine (40 mgs).
Colombia was for years the epicentre of the cocaine trade and birthed three of the world’s richest and most powerful drug cartels in the 1980s and 90s.
Today, every Colombian has the right to cultivate up to 20 marijuana plants. In Canada, the limit is four.
Brazil and Ecuador no longer criminally sanction possession of small quantities. Argentina’s Supreme Court has started tossing out convictions for possession of marijuana. Similar court rulings led to Uruguay’s decision to legalize.
Walsh said Ottawa knows “it is a serious matter to be in violation” of the treaties — but “it also knows it faces no immediate material consequences.
“I don’t see Canada backing down, nor do I see Uruguay backing down.”
More money will land in the pockets of Canadian families on Friday for the latest Canada Child Benefit (CCB) installment.
The federal government program helps low and middle-income families struggling with the soaring cost of raising a child.
Canadian citizens, permanent residents, or refugees who are the primary caregivers for children under 18 years old are eligible for the program, introduced in 2016.
The non-taxable monthly payments are based on a family’s net income and how many children they have. Families that have an adjusted net income under $34,863 will receive the maximum amount per child.
For a child under six years old, an applicant can annually receive up to $7,437 per child, and up to $6,275 per child for kids between the ages of six through 17.
That translates to up to $619.75 per month for the younger cohort and $522.91 per month for the older group.
The benefit is recalculated every July and most recently increased 6.3 per cent in order to adjust to the rate of inflation, and cost of living.
To apply, an applicant can submit through a child’s birth registration, complete an online form or mail in an application to a tax centre.
The next payment date will take place on May 17.
News
Capital gains tax change draws ire from some Canadian entrepreneurs worried it will worsen brain drain – CBC.ca
A chorus of Canadian entrepreneurs and investors is blasting the federal government’s budget for expanding a tax on the rich. They say it will lead to brain drain and further degrade Canada’s already poor productivity.
In the 2024 budget unveiled Tuesday, Finance Minister Chrystia Freeland said the government would increase the inclusion rate of the capital gains tax from 50 per cent to 67 per cent for businesses and trusts, generating an estimated $19 billion in new revenue.
Capital gains are the profits that individuals or businesses make from selling an asset — like a stock or a second home. Individuals are subject to the new changes on any profits over $250,000.
The government estimates that the changes would impact 40,000 individuals (or 0.13 per cent of Canadians in any given year) and 307,000 companies in Canada.
However, some members of the business community say that expanding the taxable amount will devastate productivity, investment and entrepreneurship in Canada, and might even compel some of the country’s talent and startups to take their business elsewhere.
Finance Minister Chrystia Freeland unveiled the government’s 2024 federal budget, with spending targeted at young voters and a plan to raise capital gains taxes for some of the wealthiest Canadians.
Benjamin Bergen, president of the Council of Canadian Innovators (CCI), said the capital gains tax has overshadowed parts of the federal budget that the business community would otherwise be excited about.
“There were definitely some other stars in the budget that were interesting,” he said. “However, the … capital gains piece really is the sun, and it’s daylight. So this is really the only thing that innovators can see.”
The CCI has written and is circulating an open letter signed by more than 1,000 people in the Canadian business community to Trudeau’s government asking it to scrap the tax change.
Shopify CEO Tobi Lütke and president Harley Finkelstein also weighed in on the proposed hike on X, formerly known as Twitter.
We need to be doing everything we can to turn Canada into the best place for entrepreneurs to build 🇨🇦<br><br>What’s proposed in the federal budget will do the complete opposite. Innovators and entrepreneurs will suffer and their success will be penalized — this is not a wealth tax,…
—@harleyf
Former finance minister Bill Morneau said his successor’s budget disincentivizes businesses from investing in the country’s innovation sector: “It’s probably very troubling for many investors.”
Canada’s productivity — a measure that compares economic output to hours worked — has been relatively poor for decades. It underperforms against the OECD average and against several other G7 countries, including the U.S., Germany, U.K. and Japan, on the measure.
Bank of Canada senior deputy governor Carolyn Rogers sounded the alarm on Canada’s lagging productivity in a speech last month, saying the country’s need to increase the rate had reached emergency levels, following one of the weakest years for the economy in recent memory.
The government said it was proposing the tax change to make life more affordable for younger generations and fund efforts to boost housing supply — and that it would support productivity growth.
A challenge for investors, founders and workers
The change could have a chilling effect for several reasons, with companies already struggling to access funding in a high interest rate environment, said Bergen.
He questioned whether investors will want to fund Canadian companies if the government’s taxation policies make it difficult for those firms to grow — and whether founders might just pack up.
The expanded inclusion rate “is just one of the other potential concerns that firms are going to have as they’re looking to grow their companies.”
He said the rejigged tax is also an affront to high-skilled workers from low-innovation sectors who might have taken the risk of joining a startup for the opportunity, even taking a lower wage on the chance that a firm’s stock options grow in value.
But Lindsay Tedds, an associate economics professor at the University of Calgary, said the tax change is one of the most misunderstood parts of the federal budget — and that its impact on the country’s talent has been overstated.
“This is not a major innovation-biting tax change treatment,” Tedds said. “In fact, when you talk to real grassroots entrepreneurs that are setting up businesses, tax rates do not come into their decision.”
As for productivity, Tedds said Canadians might see improvements in the long run “to the degree that some of our productivity problems are driven by stresses like housing affordability, access to child care, things like that.”
‘One foot on the gas, one foot on the brake’
Some say the government is sending mixed messages to entrepreneurs by touting tailored tax breaks — like the Canada Entrepreneurs’ Incentive, which reduces the capital gains inclusion rate to 33 per cent on a lifetime maximum of $2 million — while introducing measures they say would dampen investment and innovation.
“They seem to have one foot on the gas, one foot on the brake on the very same file,” said Dan Kelly, president of the Canadian Federation of Independent Business.
Some business groups are worried that new capital gains tax changes could hurt economic growth. But according to Small Business Minister Rechie Valdez, most Canadians won’t be impacted by that change — and it’s a move to create fairness.
A founder may be able to sell their successful company with a lower capital gains treatment than otherwise possible, he said.
“At the same time, though, big chunks of it may be subject to a higher rate of capital gains inclusion.”
Selling a company can fund an individual’s retirement, he said, which is why it’s one of the first things founders consider when they think about capital gains.
Mainstreet NS7:03Ottawa is proposing a hike to capital gains tax. What does that mean?
Tuesday’s federal budget includes nearly $53 billion in new spending over the next five years with a clear focus on affordability and housing. To help pay for some of that new spending, Ottawa is proposing a hike to the capital gains tax. Moshe Lander, an economics lecturer at Concordia University, joins host Jeff Douglas to explain.
Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, says he was disappointed by the change — and that it sends the wrong message to Canadian industries like his own.
He wants to see the government commit to more tax credit proposals like the Canada Carbon Rebate for Small Businesses, which he said would incentivize business owners to stay and help make Canada competitive with the U.S.
“We’ve had a lot of difficulties attracting investment over the years. I don’t think this will make it any better.”
Tech titan says change will only impact richest of the rich
Toronto tech entrepreneur Ali Asaria will be one of those subject to the expanded capital gains inclusion rate — but he says it’s only fair.
“It’s going to really affect the richest of the rich people,” Asaria, CEO of open source platform Transformer Lab and founder of well.ca, told CBC News.
“The capital gains exemption is probably the largest tax break that I’ve ever received in my life,” he said. “So I know a lot about what that benefit can look like, but I’ve also always felt like it was probably one of the most unfair parts of the tax code today.”
While Asaria said Canada needs to continue encouraging talent to take risks and build companies in the country, taxation policies aren’t the most major problem.
“I think that the biggest central issue to the reason why people will leave Canada is bigger issues, like housing,” he said.
“How do we make it easier to live in Canada so that we can all invest in ourselves and invest in our companies? That’s a more important question than, ‘How do we help the top 0.13 per cent of Canadians make more money?'”
More money will land in the pockets of Canadian families on Friday for the latest Canada Child Benefit (CCB) installment.
The federal government program helps low and middle-income families struggling with the soaring cost of raising a child.
Canadian citizens, permanent residents, or refugees who are the primary caregivers for children under 18 years old are eligible for the program, introduced in 2016.
The non-taxable monthly payments are based on a family’s net income and how many children they have. Families that have an adjusted net income under $34,863 will receive the maximum amount per child.
For a child under six years old, an applicant can annually receive up to $7,437 per child, and up to $6,275 per child for kids between the ages of six through 17.
That translates to up to $619.75 per month for the younger cohort and $522.91 per month for the older group.
The benefit is recalculated every July and most recently increased 6.3 per cent in order to adjust to the rate of inflation, and cost of living.
To apply, an applicant can submit through a child’s birth registration, complete an online form or mail in an application to a tax centre.
The next payment date will take place on May 17.
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