Article by David Clement, Globe and Mail
Much has been said about Canada’s roll-out of legal cannabis. The system thus far has been riddled with hiccups, supply shortages, prohibition-style penalties and significant limitations on consumer access. All of that aside, one of the most glaring issues with Canada’s cannabis framework is the way in which it is taxed, specifically, the excise taxes that are applied to medical and recreational cannabis.
Currently, both have a 10-per-cent excise tax, or $1 a gram, whichever is higher. The first major problem with the tax amount is that it is applied to medical cannabis, meaning patients are paying sin taxes on their prescribed medicine. Deliberately making medicine more expensive is disastrous public policy and categorically unfair.
On the recreational side, the excise tax has the immediate effect of inflating the price of legal cannabis. For recreational consumers, legal cannabis has federal and provincial sales taxes (upward of 15 per cent in some provinces), the 10-per-cent excise tax and local boutique taxes such as Manitoba’s 6-per-cent social responsibility tax. It becomes increasingly harder for the legal market to crowd out the black market when consumers in some provinces face a tax rate of 29 per cent. To achieve the goal of beating the black market, the legal market has to be able to compete with black market prices. Adding 29 per cent to a consumer’s bill certainly isn’t going to help in that regard.
The Trudeau government’s most recent budget did address the issue of cannabis excise taxes. Unfortunately, it didn’t reduce the excise tax on recreational cannabis, or remove it from medical cannabis. Instead, it announced that edible cannabis will be taxed based on its THC potency, at a rate of $0.01 per milligram of total THC in the product. This is yet another blow for medical patients. New research on cancer patients who use cannabis shows that they prefer oils and extracts, as opposed to dried cannabis, and that the most effective for relief are products with high THC potency. The new taxation for edibles, extracts and oils directly targets these patients, and makes their preferred form of medicine more expensive. Medical cannabis shouldn’t be taxed, but if it is, it certainly shouldn’t be taxed for potency.
In addition to the effect the excise tax has on recreational affordability and medical treatment, the system also causes logistical problems. As noted from a variety of licensed producers, the excise tax sticker process has led to numerous headaches. Producers have reported that some excise stickers weren’t adhesive, while others noted that sizing wasn’t appropriate. In addition, the simple process of automating the stamping of products has been complicated. U.S. companies that make the machinery to automate the process have been reluctant to sell to Canadian companies because they fear their own governments will reprimand them for entering the cannabis market. These issues inflate costs, which are then shouldered by consumers and patients, and limit access.