Call of Duties

By David Halpert

With 4/20 just around the corner and tax season now in the rear-view mirror, it seems that the issue of taxes always appears omniprescent in the cannabis industry, specifically the total duty of excise taxes on cannabis products to federal and provincial governments. A recent article in MJBiz noted that since 2018, a minimum of $1.02 billion of total duty has been brought in for recreational cannabis. While the Canada Revenue Agency (CRA) has yet to disclose figures as of the time of this writing, years of duty collected by the federal government and shared with provinces and territories are as follows: $91.6 million in 2018-2019, $256.7 million in 2019-20, and $514 million in 2020-2021. While total duty assessed on cannabis products by the federal government has increased in tandem with increased sales, according to the CRA, the total amount of cannabis levies for 2020-2021 totalled $514 million. It should be noted that of that total, $403.3 million represents “cannabis excise duty that the federal government agreed to share with provinces and territories from recreational marijuana sales in their respective jurisdictions.”

While the amount of percentage the government takes in taxes has increased over the years, for many it’s also an issue of fairness. In recent years, the federal government decided not to implement a proposed regulatory fee of $65 million on the tobacco industry in consideration of its price sensitivity in the fight against the illicit tobacco market. Meantime, the cannabis sector that faces excise taxes around 50% higher than tobacco had its regulatory fee silently renewed by Health Canada for three more years.

So is there help on the horizon?

On February 6 and 15, C3 leadership and licence holder CEOs held meetings with all of the key departments that have a hand in the fate of our sector on Parliament Hill. The Finance and Health Ministers as well as the Prime Minister’s Office and ISED were distinctly alerted to the demand for urgent action to address the financial viability of the cannabis sector and to preserve the noteworthy gains of cannabis legalization in all corners of Canada. For those interested, I suggest you go to the Cannabis Council of Canada’s website and read its Budget 2023 Submission for a more extensive breakdown of its recommendations.

Also, it should be noted that there are changes happening at the provincial level. In mid-February, the Ontario Cannabis Store (OCS) announced its plans to transition to a fixed mark-up pricing model, along with reductions in its margins, to help enable a vibrant cannabis marketplace. With this change, it’s estimated that OCS margin reductions will contribute approximately $35 million into the marketplace in 2023-24, with a full fiscal year reduction in 2024-25 estimated at approximately $60 million and compounding annually in years thereafter as the market grows. Will it? Only time will tell.

As with everything in cannabis, it looks as though we’ll have to adopt a wait-and-see mindset when it comes to greater reductions in excise taxes.

May 28-30, 2023

Grow Up Conference

Edmonton Convention Centre

Edmonton AB https://growupconference.com

June 1-4, 2023

Lift & Co.

Metro Toronto Convention Centre

Toronto ON https://liftexpo.ca/toronto-2023

June 14-15, 2023

Cannabis Wiki

Western Fair District London ON https://cannabis.wiki/

September 19-20, 2023

Hall of Flowers Toronto Enercare Centre Toronto ON www.hallofflowers.com/toronto

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