No cannabis excise tax reform in 2024 Canadian budget

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Canada’s legal cannabis industry is not getting any excise-tax relief from the Liberal government’s 2024 budget.

The budget comes shortly after two separate recommendations to the government proposing reform or review of the cannabis excise-tax structure – one from the House of Commons Standing Committee on Finance and the other from a legislative review of recreational marijuana legalization.

Although those recommendations might have raised some hopes within Canada’s legal marijuana sector, insiders told MJBizDaily that the odds of excise-tax reform in this year’s budget were uncertain.

Any remaining hopes for a tax cut were dashed when the budget was released late Tuesday afternoon.

‘Missed opportunity’

The 430-page primary budget document mentions the word “cannabis” only once, as part of a government plan to introduce legislation that would allow Indigenous governments to create their own value-added sales taxes on certain goods, including cannabis.

Canopy Growth Corp. CEO David Klein said in an emailed statement that the Ontario-based company was “disappointed that the Canadian government missed the opportunity to address the flawed excise tax regime in today’s budget.”

“This oversight signals a lack of commitment to the legal cannabis industry as well as the jobs and economic growth we create,” Klein wrote.

“The failure to correct this broken tax regime and to leave other critical issues like potency limits unaddressed will continue to hinder the growth of legal cannabis businesses and compromises consumer access to safe, regulated products.”

Top issue in Canadian cannabis

Canada’s cannabis excise-tax structure is regularly cited as the top issue facing licensed cannabis producers.

The excise tax is levied before cannabis products reach consumers, who also pay sales taxes upon purchase.

Cannabis flower and pre-rolls are taxed at either a flat rate of 1 Canadian dollar (CA$0.72) per gram or 10% of the gram’s wholesale price, whichever is greater.

In light of significant price compression in Canada’s cannabis market, however, “the 10% rate rarely applies,” a government briefing note to Canada’s finance minister acknowledged.

Cannabis extracts and concentrate products are taxed at CA$0.01 per milligram of THC.

As MJBizDaily has reported, unpaid cannabis excise taxes have been piling up, with the government finding that some unpaid excise taxes are uncollectable.

The Canadian government also increased cannabis industry regulatory fees this month.

Solomon Israel can be reached at