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Manitoba Returns $18 Million

The Manitoba Conservative Government has passed Bill 10 that will repeal the 6% Social Responsibility Fee (SRF) on gross retail cannabis revenues.

The Bill will eliminate SRF owing from retailers retroactive to January 1, 2022. This will return approximately $18 million in fees paid by legal cannabis retailers over the past two years while ensuring that at least an additional $11 million stays with retailers moving forward, on an annualized basis.

The social responsibility fee was introduced in 2018 to fund the social costs of public education, safety, and health for cannabis and eliminate the Manitoba PST charge. The Manitoba government is expected to enter the federal excise tax agreement which should be revenue neutral for the province going forward.

Larger Retailers Support Announcement

The announcement has been met with support by large cannabis retailers.

“We would like to thank the Manitoba Conservative Government and Minister Cullen for proposing the amendment to make the SRF repeal retroactive to January 2022. Cannabis retailers have voiced the need for this type of financial support to invest that capital back into their business, to lower prices, educate the public, create more jobs, and continue to put an end to the illegal market,” says John Arbuthnot, CEO of Delta 9.

“When the social responsibility fee is eliminated, Manitoba will have one of the most competitive pricing programs for cannabis in Canada. This is a strong demonstration from the Manitoba Conservative Government that they have listened to the concerns of stakeholders and have brought forward swift supports for the cannabis retail sector,” Arbuthnot adds.

Fear of Increased Competition from Large Retailers

It has been previously reported by Cannabis Retailer that Manitoba has a well-saturated market due to no restrictions on the number of cannabis retailers or the proximity between stores. There are 178 stores at present.

Until now, retailers accounted for the 6% social responsibility fee in their pricing and would pay their fees in a lump sum. With no provincial minimum margins for sales, some retailers worry that larger companies will be able to absorb a proposed new tax framework more easily than smaller, independent retailers.

If the province adopts the federal excise tax model, taxes on one gram of cannabis would go from $0.25 to $1.00. This could result in many retail businesses closing if the price of cannabis goes up for consumers, but larger businesses can offer lower prices.

Tags: Cannabis Retail (401), cannabis tax (5), excessive excise tax (3), illicit cannabis market (8), Manitoba cannabis retailers (2), social responsibility fee (2)