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Taxes Are Killing the Cannabis Industry

The Canadian cannabis industry needs immediate action to revise the tax structure that is killing the legal cannabis industry as producers, processors, and retailers struggle to survive with excessively high tax rates. George Smitherman, CEO of the Cannabis Council of Canada (C3) says, “The current model of taxes and fees leaves too little for the producers and processors of cannabis that have invested billions in communities across Canada.”

The cannabis industry has created 150,000 jobs in both large and small communities across Canada and these jobs are now at risk as more companies are closing their doors.

Excessive regulations have also added to the cost of doing business in the cannabis sector and is affecting the financial viability of companies. In question period at the legislature, MP Scott Reid said, “Canada’s legal cannabis sector functions under crushing federal taxes and insanely high regulatory compliance costs. The result is that for consumers, legal cannabis costs about twice the price of illegal product. The government has made it impossible for legal producers to be competitive by closing this price gap.”

Canadian Cannabis Revenue

Statistics Canada recently released a report showing that the Canadian cannabis authorities have generated $1.55 billion in net income on sales of $3.1 billion in the past year!

Net Income of Cannabis Authorities and Government Revenue
from the Sale of Cannabis
Cannabis Revenue 2021/2022 Dollars (x1,000)
Cannabis authority sales 3,108,932
Deduct: cost of goods sold 2,453,286
Gross profit 655,646
Deduct: administrative and general expenses 349,946
Add: Other income 26,619
Net income of cannabis authorities 332,319
Total taxes and other revenue 1,219,842
Federal excise tax and customs duties 160,241
Provincial and territorial excise tax 592,225
Harmonized sales tax 236,100
Goods and services tax 110,674
Provincial/Territorial sales tax 110,818
Other provincial/territorial revenue 9,783
Net income of cannabis authorities and total taxes and other revenue 1,552,161

Source: Statistics Canada. Table 10-10-0165-01  Net income of cannabis authorities and government revenue from the sale of cannabis (x 1,000)

Budget 2023

As the federal government is getting ready to announce its 2023 budget, C3 is advocating for no regulatory fees for cannabis, so that this industry is treated the same as alcohol and tobacco. According to C3, the cannabis sector faces excise taxes around 50% higher than tobacco. Smitherman says, “Cannabis warrants a do-over from this unequal practice and the $100 M plus collected to date by Health Canada refunded!”

Photo courtesy of Cannabis Council of Canada. CEO delegation included Jonathan Wilson, CEO Crystal Cure, Margaret Brodie, Acting CEO and CFO Rubicon Organics, Niel Marotta, CEO Indiva, George Smitherman, President and CEO of the Cannabis Council of Canada, Mandesh Dosanjh, CEO Pure Sun Farms, Lennie Walser, President TRURO Cannabis, Pierre Killeen, Vice President Cannabis Council of Canada.

Tags: C3 (12), Canadian Cannabis (87), Cannabis Council of Canada (25), Cannabis Regulations (88), Excessive cannabis taxes (1), excise tax (8), George Smitherman (23), Health Canada (57)