Recently, Canadian Minister of Health Mark Holland and Minister of Mental Health and Addictions Ya’ara Saks released the final report on the review of the Cannabis Act. The report includes a recommendation for a reduction in the excise tax imposed on cannabis producers, which had raised significant expectations among industry stakeholders. Currently, as the Canadian cannabis market continues to expand, especially small-scale producers are struggling to maintain profitability due to excessive tax burdens.
In the current system, adopted when cannabis was legalized in 2018, producers are required to pay taxes to both provincial and federal governments amounting to more than 30% of their total sales. At the time of legalization, the tax rate was set at either 10% of the sale price or 1 Canadian dollar per gram, whichever was higher, based on an assumed average sale price of 10 Canadian dollars per gram. However, the current average price has dropped to less than half of that, making the fixed tax amount of 1 Canadian dollar per gram a significant burden for producers.
Following the release of this report, the Canadian government announced the 2024 budget on April 16, 2024. Unfortunately, it did not include the anticipated changes to the excise tax rate desired by cannabis businesses, confirming that the industry will continue to face high taxation rates. As a result, the economic burden on Canadian cannabis businesses will persist.
