• Government document speaks of producers'
  • Government document speaks of producers'

Document gouvernemental parle de la "détresse financière" des producteursCanada

Publié le 15 mars 2024 par AQIC

Canadian Finance Minister Chrystia Freeland was warned last fall about systemic “financial distress” facing the country’s cannabis producers, including skyrocketing tax debt and widespread insolvencies.

The calamities facing the industry were spelled out in briefing materials obtained through an access-to-information request and shared with MJBizDaily.

One of the documents included with the briefing note, drafted by an official within the Department of Finance Canada’s Tax Policy Branch, updates Freeland on the financial state of Canada’s adult-use market.

According to the report, “It remains the case that after five years of legalization, there are no licensed producers of legal cannabis products that are consistently profitable.”

The briefing note, titled “Update on financial distress in cannabis production industry,” documents a litany of issues facing the sector, including:

  • Unfair profits earned by some provincially owned cannabis wholesalers.
  • Snowballing unpaid excise taxes by cannabis producers.
  • Almost no sustainable profits earned by cannabis companies.
  • A disproportionate number of cannabis producers entering creditor protection and even bankruptcy.
  • Falling prices, made worse by ‘inventory liquidations’ by companies that go under.

A separate memorandum marked “Secret” was sent to the minister of finance and was almost entirely redacted.

The “financial distress” briefing note came amid the industry’s lobbying efforts to ease taxes levied against cannabis producers.

Industry group Cannabis Council of Canada told MJBizDaily it had briefed officials at the Department of Finance Canada and Health Canada many times about the “lopsidedness” in marijuana taxes and regulation but had limited success.

“It’s (the federal government’s) model. Over and over, we’ve suggested so many ways to fix this: lowering the tax rate, fixing the clumsy excise stamp administration, removing taxes for patients and more,” Rick Savone, Cannabis Council chair, said when asked by MJBizDaily to comment on the briefing materials.

“The federal government’s design of the program is flawed on so many levels, but it’s their own design.

“Maybe the next federal budget will finally acknowledge our industry’s financial struggles by delivering concrete actions, as Minister Freeland has done recently for other regulated industries.”

The briefing note said that dried cannabis, which represents majority market share, is still subject to excise duties of 1 Canadian dollar (74 cents) per gram, or 10% of the wholesale price, whichever is higher.

The report acknowledges, however, that “in practice, the 10% rate rarely applies.”

That might be the first time the government acknowledged the excise tax is usually CA$1 per gram of dried cannabis, which is generally much higher than 10% of the wholesale price.