NEWS BRIEF

Canada to launch review of cannabis industry fee structure

Health Canada will soon embark on a review of fees collected by the federal government from cannabis companies, including studying the impact those fees have on the industry as well as the policy goals of legalization.

“License holders will be engaged in this work over the coming months,” Health Canada spokeswoman Tammy Jarbeau told Marijuana Business Daily.

Health Canada’s planned review will be carried out in the upcoming fiscal year, which ends in March 2022, “to assess the impact of the cannabis fee structure on the policy goals of the Cannabis Act and on industry, as well as the progress made toward achieving full cost recovery,” she said.

The fees are intended to recover regulatory costs borne by Health Canada.

Canada’s Cannabis Fees Order established fees, including:

  • An application screening fee.
  • A security clearance fee.
  • An import/export permit fee.
  • An annual regulatory fee.

Myrna Gillis, co-founder and CEO of licensed cannabis producer Aqualitas, would like to see more proportionality and reasonableness baked into the fee structure.

“We are getting it from both sides,” she said in reference to cannabis producers having to pay excise taxes in addition to the fees.

“This industry is in its infancy. If it’s not successful, the illicit market is going to come back and thrive again,” the CEO of the Nova Scotia-based cannabis producer said in a phone interview.

She’d like to see a more proportional fee structure for smaller, standard producers.

Industry group Cannabis Council of Canada welcomes the upcoming review.

The association has been concerned the various fees and taxes levied on legal cannabis businesses is dampening their competitiveness with the illicit market.

“Since legalization, cannabis prices have come down a lot, and that has been entirely borne on the backs of industry reducing the input cost of the product or goods,” Council CEO George Smitherman told MJBizDaily.

“Meanwhile the proportion of cost to consumers represented by regulation, taxes and markups continues to grow.”

He said the whole spectrum of fees charged by the federal government needs to be scrutinized.

For instance, holders of standard cultivation and processing licenses are subject to a fee of 2.3% of cannabis revenue or 23,000 Canadian dollars ($18,400), whichever is higher.

Micro-class license holders must pay 1% of cannabis revenue under CA$1 million or CA$2,500, whichever is higher.

“Those fees produce upwards of CA$50 million a year (for the government) and should be providing a speedy service level, but they don’t,” Smitherman said.

“Licensees are frustrated because the fee is large and the service standard is quite low.

“These fees should be offset by the taxes the government collects.”

Separate from the regulatory fees, the Canadian government also charges excise taxes.

Information on Canadian cannabis industry fees can be found here.

Matt Lamers is Marijuana Business Daily’s international editor, based near Toronto. He can be reached at matt.lamers@mjbizdaily.com.

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