Medical Cannabis Users Brace for Tax Hikes When Recreational Marijuana Becomes Legal

Medical Cannabis Tax: It will be unfair for medical marijuana users, but when recreational marijuana becomes legal in Canada in October, they will have to pay more tax on their medication.

But why?

Medical Cannabis Tax: Adding Taxes

Similar to retail goods, medical marijuana already has an attached HST tax (or Harmonized Sales Tax). This can be considered "unfair" as other medications are not subject to this tax. Already a quandary, the government will now be issuing an excise tax of $1 per gram or 10% of the pre-sale price, on top of that.

The government has reasoned that charging the same price for recreational and medical marijuana will deter people from abusing the medical regime as it won't be priced lower. However, this idea has been strongly challenged by the advocacy group Canadians For Fair Access to Medical Marijuana, who consider the reasoning "wrongheaded and insulting".

Further, there are arguments put forth that pricing medical marijuana too high will drive many of its low-income users to the very black market the government is trying to cull. 

Source: Canada Revenue Agency, Marijuana Tax Breakdown Example

Taxes

HST varies across the provinces of Canada and can fall as low as 5% in some areas but be as high as 15% elsewhere. And while medical marijuana users are preparing to take a further financial hit, they are not alone. In Manitoba for example, retailers will have to pay 6% of their revenue to a "social responsibility tax".

"I don't think it's fair that I have to pay tax on medication, to begin with… and now they're adding more taxes to it," said Jean-François Turcotte, a medical marijuana user who uses it to relieve pain. 

What is perplexing is the treatment medical marijuana gets in comparison to other medications; in Ontario, medications such as opioids, are covered under a drug plan for clients of ODSP -- a body aimed at helping people with disabilities. However, medical marijuana is not.

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The rising cost of marijuana may just exclude those who need it the most but there is some light on the situation. One licensed producer, Canopy Growth (NYSE:CGC), has offered to cover the cost of the excise tax for its medical customers.

Perhaps other companies will begin to do the same to help ease the burden.

Featured Image: Deposit Images/VadimVasenin

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