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Canada’s House of Commons Standing Committee on Finance has recommended a change in how cannabis is taxed.
This major change would see the current rate of $1 per gram, or 10% of a producer’s selling price (whichever is higher), be limited to 10% ‘ad valorem’, a percentage of the wholesale selling price of the cannabis product.
According to Canadian cannabis operator Organigram Holdings, who came out strongly in support of the proposals, the current framework means that the tax level is often equivalent to 35% of revenue, ‘undermining competitiveness and growth’.
The high tax burden on Canada’s operators has long been the Achilles heel of its adult-use industry, leading to a thriving illicit market and a growing trend of Canadian producers selling products abroad to increase profits.
It has also caused a huge backlog in payments, with reports suggesting that as of the middle of last year, some $200m was owed to the Canada Revenue Agency (CRA) in excise tax.
This too could soon be about to change, as the CRA looks set to impose new regulations that would see wholesale payments to licensed producers in arrears redirected to the federal government.
According to reporting from MJBiz Daily, this process of ‘garnishing’ payments, which would effectively prevent these companies from collecting money from their largest wholesale customers, is an unprecedented move and one that speaks to the severity of the situation in Canada.
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