The drop in the price of cannabis has made Canadian cannabis operators ask lawmakers to amend the current excise taxes levied on marijuana production and sales. Globe and Mail reported that the flat-fee tax structure is disadvantageous with the current decline in marijuana prices. According to marijuana business leaders, the current tax structure was based on expectations before legalization. However, after legalizations, the regulators' projection failed.
The tax was fixed based on the presumption of the price of marijuana per gram. Before legalization, it was projected that the price of marijuana per gram would be $10. The excise tax for dried cannabis was set at either 10% or $1 per gram, whichever was higher. With marijuana now selling for less than $10 per gram and the excise tax imposed at the time of production and not retail, the tax ends up taking most of the producer's profit.
The President of the Cannabis Council of Canada, George Smitherman, explained that sometimes, producers pay between 20 to 45% tax instead of the fixed 10%. He continued by saying that if the excise tax was lowered, producers would also reduce their prices, which would allow them to compete with the prices of the illicit market and would end up maintaining more profits in the process.
Research showed that producers sometimes end up with a meager fifth of the proceeds from selling their products. A report from EY showed that just 22.7% of the total proceeds from each gram of cannabis sold in an Ontario dispensary goes to the producer. 35% goes towards harmonized sales taxes and excise duties, while retailers take 20%.
There are concerns that the call for review may not bring about the necessary changes. The CEO of Organigram, Beena Goldenberg, is not optimistic about seeing any changes. Goldenberg, a major advocate for removing the 2.4% regulatory fee, said,
"They are getting so much from us. Why burden us with an extra fee to cover the regulatory costs of the industry."
According to recent data from Deloitte, Canada's cannabis industry has delivered $15.1 billion in tax revenues since 2018. $2.9 billion of this amount comes from sales and excise taxes alone.
Featured Image: Megapixl © Artproximo
