Canada’s Cannabis Tax Plan: Good for Provinces, Bad for Patients

The new deal between the federal and provincial governments on sharing cannabis tax revenue has been applauded by some stakeholders and criticized by others.

Under the terms of the two-year deal, announced earlier this week, the 13 provinces and territories will get 75% of federal excise tax revenues from the sale of legal cannabis, some of which will be distributed to municipalities. Ottawa will keep the other 25%, up to a maximum of $100 million a year. Any balance above that will go to the provinces and territories.

Recreational and medicinal cannabis will be taxed at the same level—and that has drawn heavy criticism from some politicians, physicians, and patient advocates.

In hopes of keeping prices low enough to draw customers away from the black market, the per-gram price of legal cannabis will be $10 or lower. Each gram of marijuana will have a tax of one dollar on sales as much as $10 and a 10-percent tax on sales above that.

This final deal is sweeter for the provinces than the proposed deal, unveiled in November, which called for a 50-50 split. That plan drew fierce criticism from the provinces and territories, which insisted they should be given a bigger piece of the pie because they will be footing the bill for costs related to distribution, regulation, policing, and public health.

The finance ministers and various stakeholders gave the new deal a thumbs-up.

“It is encouraging to see the federal government move quickly on reaching an arrangement with the provinces, that more equitably reflects the relative contributions provided by each government entity,” Michael Garbuz, legal counsel at the investment firm CannaRoyalty, told Leafly. “As full-adult use legalization approaches rapidly in Canada, it remains imperative for regulators and other stakeholders to continue making decisions that help achieve the core objectives of legalization including driving out the illicit market, harm reduction, public safety, and establishing a safe and responsible supply chain.”

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Nick Dean, CEO of Emblem Corp, an Ontario-based licensed producer, described the deal as “a wise move for the federal government. It’s critical that the provinces are motivated and compensated to build the greatest cannabis customer experience possible including public education, public safety, product awareness, and ultimately controlled distribution,” he told Leafly.

“The government’s proposal to apply excise tax to medical cannabis demonstrates a careless disregard for the health of Canadians.”

Jonathan Zaid, Canadians for Fair Access to Medical Marijuana

Recreational and medicinal cannabis will be taxed at the same level—and that has drawn heavy criticism from some politicians, physicians, and patient advocates.

“The government’s proposal to apply excise tax to medical cannabis demonstrates a careless disregard for the health of Canadians,” Jonathan Zaid, executive director of Canadians for Fair Access to Medical Marijuana, told Leafly. He urged the federal government to “address the concerns voiced by medical cannabis patients and the over 15,000 Canadians who have written their MP via [CFAMM’s] Don’t Tax Medicine campaign. Medical cannabis must be treated like all other prescription medications and be exempt from tax.”

A group of more than 50 physicians joined in the chorus of opposition. Just hours after the deal was announced on Monday, the group released a statement urging Ottawa to withdraw its plan to charge tax on medicinal cannabis “or risk having an adverse effect on patients.” The doctors, who prescribe cannabis for their patients, say a tax would impose a financial barrier for those who rely on cannabis for medical purposes.

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“The new taxes being proposed on medical cannabis [are] discriminatory towards patients,” said Dr. Michael Verbona. “All medications prescribed have zero tax. At a time when we are suffering from an opiate crisis the last thing we should do is introduce financial barriers to patients accessing a safer alternative.”

Alexandre Boulerice, the NDP’s finance critic, echoed those words. He said taxing medical cannabis could end up keeping it out of the hands of those who need it.

“The imposition of sales tax and excise tax on medical marijuana is unfair, it is stupid and potentially dangerous,” Boulerice said. “If the price of medical marijuana goes too high … it will potentially incite people to buy some cheaper drugs like opioids as painkillers.”

Last month, Bill Blair, the federal government’s point man on the legal cannabis program, said recreational and medicinal cannabis would be taxed at the same rate to ensure that recreational users don’t seek medicinal cannabis simply because it’s less expensive.

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