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Canada defers regulatory fee deadline for cannabis industry

Licensed Canadian cannabis companies are getting an extended deadline to pay an annual regulatory fee in light of disruptions caused by the COVID-19 pandemic.

Federal cannabis license holders in their first full fiscal year or later fiscal years, which were required to pay the annual fee for the 2020-21 period by Sept. 30, 2020, will now have until March 31, 2021, to settle up.

However, the payment due date was not delayed for new license holders who owe a fee for their “entry year” of licensing.

The amendment to the cannabis-fees order, dated July 23, was published Wednesday in the Canada Gazette Part II.

George Smitherman, CEO of Cannabis Council of Canada – an industry body based in Ottawa representing regulated marijuana producers – characterized the six-month fee deferral as “a pretty minor offering in the grand scheme of things.”

Smitherman told Marijuana Business Daily that federal regulator Health Canada told him it anticipated collecting roughly 40 million Canadian dollars ($30.1 million) in the Sept. 30 round of regulatory fees.

But Canada’s cannabis sector as a whole is worth billions, he pointed out.

“I mean, at the heart of it what we’re facing is a startup industry and lots of liquidity challenges,” Smitherman said.

He added that the government’s move to push back the deadline “is helpful, you can’t argue otherwise.”

“But we shouldn’t overestimate the extent to which companies are going to find very much relief from this.”

Deferring the due date for the annual fee payment “will have a similar effect as a short-term loan, providing greater liquidity to federal license holders at an economically challenging time,” according to the federal government’s regulatory impact analysis statement.

Health Canada received 167 submissions during its consultations on the due date deferral.

While the majority of respondents gave positive feedback about the idea, some told the regulator that the industry didn’t need economic relief as a result of the COVID-19 pandemic.

“Additionally, respondents reported that the cannabis industry was potentially experiencing an increase in sales and earnings compared to other businesses over the pandemic period,” the government’s regulatory impact analysis statement noted.

Canada’s cannabis regulatory fees are meant to recoup the federal government’s costs for regulating marijuana production.

For standard cultivation license holders, the fee is 2.3% of annual gross revenue from cannabis or CA$23,000, whichever is higher.

Smitherman said he’d like to see the regulatory fees tied to service standards for the federal cannabis regulator.

“Because, in a sense, these are the regulatory costs that the industry is bearing, and in return, we have a lot of service requirements from Health Canada.

“There are always issues around those timetables, and that’s gotten way more complicated in the context of COVID.”

Solomon Israel can be reached at [email protected]

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