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Prime Minister Justin Trudeau acknowledged the need for the government to “catch up” with the cannabis industry’s concerns with issues like high taxation in a recent public event.
In a town hall meeting on March 16 in Newfoundland and Labrador, Trudeau responded to comments from Taylor Giovannini, the owner of a local cannabis producer and retailer Oceanic Releaf.
Giovannini shared her concerns with the challenges businesses like hers face due to issues like high taxes and challenges working with banks.
The cannabis industry has been calling for reforms to the federal excise tax rate for years now, arguing it ends up being a tax rate of as much as 30 percent or more of their revenue. For fiscal year 2018-2019, the first year of legalization, the CRA assessed $71,922,000 for cannabis duty on dried/fresh cannabis flower and $19,534,000 for cannabis extracts, including edible/ingestible cannabis oil, for a total of $91,563,000.
For fiscal year 2019-2020, the CRA assessed $229,697,000 for cannabis duty on dried/fresh cannabis flower and $25,743,000 for cannabis extracts, including edible/ingestible cannabis oil, and $1,182,000 for cannabis edibles, for a total of $256,622,000.
Many cannabis companies in Canada have long found it difficult to find and keep a bank or other lending institution, or even to maintain an account, with one producer recently even filing a lawsuit against several Canadian banks.
Giovanni told Saltwire that the first cannabis retail store she opened “almost collapsed” when the Bank of Montreal cancelled their business account.
Challenges with cannabis businesses in Canada getting and keeping relationships with lending institutions are well known, with many banks unwilling to do business with what they see as an uncertain industry.
Some have turned to smaller lending institutions like credit unions, some of which have leaned into the gap left by larger banks.
Giovanni’s question for Trudeau was when the new cannabis industry will see relief on some of these issues, especially in light of the federal legislative review of the Cannabis Act.
In his response, Trudeau first brought up the government’s historically public-health focussed messaging around legaization, but noted that now that the legal system is established, the government has a need to take a look at ensuring those businesses who “stepped up” in this new industry can survive.
“…we didn’t legalize so that there would be growth in jobs and opportunity, we legalized out of a public health concern,” Trudeau told the crowd. “The current situation was not keeping Canadians safe, it was giving kids too easy access to cannabis, it was fuelling the black market that then turned around and fuelled all sorts of other illegal activities, and we made the decision on a health basis. If we had gone into this saying ‘okay let’s design a burgeoning new industry that we can create success’, we might have made some different choices, but we looked at it from a public health and safety standard.
“Now that we’ve got the public health and safety stuff out of the way, or on the way, I think you’re absolutely right that we should absolutely take a much closer look at ‘okay, what do we do then to make sure that this is a beneficial industry?’
“You can say ‘well it’s a drug’, but boy are we ever proud of our wineries across Canada, are we ever proud of our microbreweries…these are consumption choices….(cross talk)…people are evolving, and I can understand that the people who stepped up into the industry in its infancy are being part of the growing pains and we will try and make sure that we’re capturing your concerns as we look at renewal of the Act, which we knew we were going to need to do.
“There is a little more clarity about how the industry is evolving and it’s easy to say ten years from now, fifty years from now it will be great. Right now you’re in the industry, you have payroll you’re trying to make, you’re trying to support people, we want to try and get there for you as well. But this was done not because we were going to create jobs with it—although we knew that would happen—it was done out of a public health and justice approach. But hopefully we’re going to be able to catch up and be supportive of the real positive industry that it has become.”
The Cannabis Act review panel has been engaging with numerous cannabis industry stakeholders, patient groups, and others across Canada since the full panel was announced in late 2022. The group is tasked with then compiling a report for the government based on that feedback, creating a report that will be presented in the House of Commons likely in early 2024.
In addition, as part of Budget 2022, the federal government noted that as the legal cannabis industry in Canada grows, there are opportunities for the federal government to “streamline, strengthen, and adapt the cannabis excise duty framework specifically, and other excise duty regimes under the Excise Act, 2001 accordingly.” That work is being conducted, in part, by ISED—Innovation, Science and Economic Development Canada—a federal agency that focuses on increasing Canada’s share of global trade.
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