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Canada is set to explore a new excise tax system for cannabis businesses next year in welcome and long-awaited efforts to ‘cut red tape’.
In its ‘2024 Fall Economic Statement’, published this week, the Federal government announced new plans to ‘explore a transition from cannabis excise duty stamps specific to each province and territory to a single, national stamp’.
The current system requires producers to navigate 13 separate provincial and territorial excise stamps, a logistical headache that industry leaders argue adds significant costs and administrative burdens.
Canada’s excise tax on cannabis, which sits at $1 per gram or 10% of a producer’s selling price (whichever is higher), has long been the Achilles heel of its adult-use industry, leading to a thriving illicit market and a growing trend of Canadian producers selling products abroad to increase profits.
It has also caused a huge backlog in payments, with reports suggesting that as of the middle of 2023, some $200m was owed to the Canada Revenue Agency (CRA) in excise tax.
As Business of Cannabis reported in March, Canada’s House of Commons Standing Committee on Finance recommended a change in excise tax.
The committee proposed that the tax be limited to be to 10% ‘ad valorem’, a percentage of the wholesale selling price of the cannabis product.
Weeks later, the government published the long-awaited final report on its review of the Cannabis Act, which made 54 recommendations on how to improve the country’s adult use market, including making changes to the excise tax rate.
However, in April, hopes of tax relief for Canada’s cannabis industry were derailed as the country’s Federal Budget 2024 revealed excise taxes would not be changed.
Signs that reform could be on the cards for next year, with the Economic Statement suggesting ‘more details will roll out in Budget 2025’ (expected in February), is therefore very welcome news for Canadian businesses.
While the harmonized stamp is seen as a positive development, it doesn’t address the industry’s larger concerns about the federal excise tax rate itself. Producers argue that the high tax burden, combined with operational costs, threatens the viability of legal businesses, particularly small and micro-producers.
“}]] Canada is set to explore a new excise tax system for cannabis businesses next year in welcome and long-awaited efforts to ‘cut red tape’. Read More
