In November 2017, the federal Department of Finance issued legislative and regulatory proposals for the taxation of cannabis to regulate its distribution “with appropriate federal and provincial excise taxes applied.” The subsequent legislation came from amendments to the Excise Act, 2001.
This act means licensed producers (LPs) come under similar guidelines as tobacco, wine, and alcoholic spirit companies. LPs will be required to pay for excise duties upon legalization of recreational cannabis on Oct. 17.
Excise duties are different from sales taxes, as excise duties are payable by the producer or importer of the good, rather than the customer. However, the LP will need to recover the fees as a cost of production, which in turn, will increase the cost of the final product sold to consumers.
Established in December 2017, this would translate differently in each province as the federal government reached an agreement with all but Manitoba on a coordinated cannabis taxation framework to share the revenues from a federal excise duty for the first two years after legalization. Within the arrangement, the federal government will receive 25 percent of this tax, and provincial governments will receive 75 percent, with a cap on the federal government of $100 million per year.
The new legislation will tax cannabis at $1/gram or 10 percent of the sale price on all cannabis products – whichever is higher.
It should come as no surprise that the government is taking their share of the profits, but what’s creating the debate for many in the cannabis community is that, as the law stands now, this excise duty would also be applied to medical cannabis. Further, even though there are minimal exceptions to these excise duties, the majority of medical cannabis users consume products that do not fit within this exemption.
While many patient groups are advocating against this, Licensed Producers have also come together to advocate for an end to this tax. LPs, including INDIVA, understand that fair access to medical cannabis is crucial for patients and a significant portion are already having difficulties getting access due to poor, limited, or negligible insurance coverage on their policies.
To address the issue, Heather Tayler from Vancouver, BC initiated Petition E-1528 (Cannabis). This petition to the Government of Canada highlights a few key elements:
- Applying any tax to medically prescribed cannabis is inconsistent with the taxation of all other prescription medicines, which are tax exempt;
- Taxes applied to medical cannabis create financial barriers to health and well-being for patients, and discourage Canadians from accessing the regulated medical cannabis system;
- Patients already pay sales tax on medical cannabis and aren’t eligible for reimbursement under most insurance plans in Canada; and
- The federal government’s newly announced proposal to apply excise taxes to medical cannabis, in addition to the existing sales tax, will disadvantage Canadians seeking treatment using medical cannabis
Thank you for joining INDIVA and our friends and colleagues in pushing for more affordable medicine and better access to medicinal cannabis.