Canadian federal cannabis tax revenue outpaces beer, wine

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Canada’s federal government collected more excise tax revenue from cannabis than it did from beer and wine last year.

That comes as a parliamentary committee is recommending the government ease up on the cannabis tax.

In the 2022-23 fiscal year ended March 31, the federal government received 610.1 million Canadian dollars ($450 million) from excise duties applied to beer.

According to the country’s Public Accounts, which provides detail on the government’s financial operations, in the same fiscal year, excise from other products was:

  • CA$277.6 million from wine.
  • CA$204.4 million from manufactured tobacco.

Beer and wine excise revenue combined was CA$887.7 million.

Federal excise duties from cannabis that year, meanwhile, amounted to approximately CA$894.6 million, of which CA$667.6 million was transferred to provincial and territorial coffers.

That left about CA$227.1 million for the federal government in 2022-23.

The federal government’s share of the national excise cannabis levy has grown significantly in recent years.

In the fiscal years ended March 31, the federal government’s share of the cannabis excise levy was:

  • CA$160.22 million in 2021-22.
  • CA$108.9 million in 2020-21.
  • CA$52 million in 2019-20.
  • CA$18.4 million in 2018-19.

Canada’s cannabis levy has been subject to substantial scrutiny from the legal marijuana industry, which says the formula the government uses to apply the tax is disproportionate and unfair.

In its report in advance of the 2024 federal budget, the House of Commons Standing Committee on Finance made 359 recommendations, covering everything from foreign to environmental policy and taxation.

The committee proposed adjusting the excise-duty formula for cannabis.

It wants the excise duty changed so that it’s limited to a 10% ad valorem rate, meaning 10% of the value of a transaction.

The duty currently imposed on producers’ dried cannabis is either CA$1 per gram or 10% of the value of the gram, whichever is greater. This can end up amounting to upward of 30% of cannabis revenue.

For example, Toronto-based cannabis producer Organigram Holdings reported gross sales of CA$233.6 million for its fiscal year ended Sept. 30, 2023.

That same year, the company’s federal excise bill amounted to CA$72 million – for an effective excise levy of 30%.

Recommendation 156 asked the government to provide investments for First Nations engagement in the Cannabis Act review. However, that review is expected to be completed before the budget is released this spring.

The federal government is not obligated to accept the 359 recommendations, including adjusting the cannabis excise rate.

David Klein, CEO of Smiths Falls, Ontario-based Canopy Growth Corp., told MJBizDaily that the committee’s recommendation to adjust the excise formula “is a testament to the broad political consensus behind these changes which address some of the most critical issues facing the Canadian cannabis industry today.”

“We encourage the Federal government to rapidly implement these recommendations which will meaningfully improve the financial health of the industry and remain committed to working collaboratively to support the long-term sustainability of the cannabis industry in Canada.”

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.