Once recreational cannabis is legalized in Canada, all of it will be subject to established federal taxes and sales tax. In provinces like Saskatchewan with a lower provincial sales tax, an excise duty will be charged at the producer level.
An excise duty is a type of tax levied against the production of a good, in this case, cannabis. This duty will be 6.45 per cent against the wholesale price.
A Saskatchewan Ministry of Finance official told Global News this is being done to balance out the tax rate across all provinces and territories. The goal is to have a similar price for cannabis across all Canadian jurisdictions.
“This is essentially the same idea as equalization. You’re tying it to what’s happening in the province in capacity and saying here’s the top up,” University of Regina associate economics professor Jason Childs said.
“What it does, is it allows the province to generate some extra revenue without having to raise the headline tax rate.”
This provincial duty will be added alongside another federal excise duty. This is $1 per gram or 10 per cent of the price, whichever is producer price is higher. Twenty-five per cent of this tax will go to the federal government, and the remainder goes to the province.