Small cannabis growers are raising concern over high excise taxes that are being imposed on their businesses. According to growers like Dan Sutton of Tantalus Labs, craft businesses are paying as much as 30% in excise taxes on their top revenue lines. A figure that for some can even exceed staff salaries. Sutton claims that the taxation on cannabis in Canada is the highest in the world and no other product in the country suffers this level of duty. Sutton noted that unless there was a reform to the current regime, many businesses would end up becoming insolvent.
Gord Nichol of North 40 Cannabis has also supported this view, saying that the current excise taxes were taking an unfair portion of the little profit growers were earning. The average wholesale price on cannabis products is about $4.50 per gram, with $1 going towards excise tax. This has created a tough environment in which these businesses operate with another challenge being the continued existence of a black market. Despite gains having been made in securing larger portions of the cannabis market by the regulated market, Nichol believes that the high taxes could be preventing even more illicit growers from turning legit.
He further added that small growers were also suffering due to heightened competition from large shareholder-subsidized corporations that have been able to price their products below cost. He also faulted Health Canada and the Canada Revenue Agency for the excessive tax reporting requirements that are a drain on small operators. It is also disappointing that with the Cannabis Act coming up for review later this year, Health Canada has stated that there are limited resources to undertake the review.
Despite being legalized just 3 years ago, the cannabis industry has grown rapidly and now accounts for $18.3 billion of the country’s GDP. Besides the high excise taxes, growers also have to contend with a 2.3% of sales fee that is collected by Health Canada as an ‘annual regulatory fee’. Additional fees are also charged by provincial authorities and other agencies. All this has forced small growers to keep their pricing higher and unable to effectively compete with the black market. They are also required to abide by stringent regulations and restrictions, some of which are tougher than what is applied to the alcohol and tobacco industries, despite cannabis being considered safer than both.
To help get their message across to lawmakers, the growers have started an online campaign dubbed ‘Stand for Craft’. It is inviting supporters to share their views through the platform to over a hundred influential government stakeholders, calling for immediate excise reform.
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