Today, Canadians are learning the details of the federal government’s proposed tax framework for legal cannabis.
The complex tax structure includes a federal excise duty of 50 cents per gram of cannabis, or five percent of the producer’s sale price of the product, whichever is higher.
If provinces agree to the proposed framework, the federal government has stated that total federal and provincial/territorial taxes should not exceed $1 per gram, or 10 percent of the producer’s sale price of the product, with tax revenues shared equally between the two levels of government.
Cannabis products will also be taxable under GST/HST. These taxes will be paid directly at the point of sale.
The proposed duty will be applied to medical cannabis and starter material intended for patients who grow at home, though products produced by these patients or their designated growers will not be subjected to the duty. (GST/HST are already applied to medical cannabis.)
Manufacturers would pay the excise duty, while GST/HST would be applied at the point of sale and paid by the consumer.
If the proposed framework were approved by Parliament, it would be adopted into the existing Excise Act, which applies duties on tobacco, wine, and spirits.
Taxable products include fresh and dried cannabis, cannabis oils, seeds, and seedlings intended for home cultivation.
Different materials will be taxed at different rates. If not taxed at a rate of five percent of the producer’s sale price, ‘trim’ will be taxed at 15 cents per gram, while seeds and seedlings will be charged 50 cents each.
A closer look at examples provided by the finance department lays out the numbers: if the price of one gram of cannabis were $8, an excise duty of $1 would be applied. That $9 total would then be subjected to GST/HST ($1.17), for a total of $10.17 per gram.
Similarly, the duty on a 60-mL bottle of cannabis oil priced at $130 would come to $13. The $143 subtotal would then be subjected to GST/HST, for a total of $161.59.
All federally licensed cultivators and manufacturers will be required to obtain a cannabis license from the Canada Revenue Agency for tax-reporting purposes. Entities that don’t comply with the tax will be subjected to penalties that will be similar to those currently applied to the alcohol and tobacco industries.
Once products are removed from their facilities, they’ll be marked with an excise stamp, in a similar fashion as tobacco products. The amendements to the Excise Act would prohibit the possession or sale of any unstamped cannabis products.
Stakeholders, businesses, and the public have until December 7 to submit their feedback on the proposed framework to the federal government.
Tilray, a licensed producer based in Nanaimo, responded to the proposal in a statement emailed to the Georgia Straight.
‘Today’s proposal by the federal government for a 10 percent excise tax, over and above the GST/HST, is within the reasonable range of taxation for recreational adult-use cannabis,’ said CEO Brendan Kennedy.
However, the company has taken issue with the plan to tax patients who use cannabis, and said the government should instead ensure that cannabis for medical purposes is zero-rated.
‘Taxing medical and recreational cannabis at the same rate will erode the medical cannabis system, negatively impacting Canadian patients. Tilray has long advocated alongside our patients for medical cannabis to be zero-rated and will continue to do so.’