Canada plans to introduce tax on cannabis

The Canadian government is consulting on proposals to tax cannabis products, saying its current approach to the drug is not working and it is committed to legalising, regulating and restricting access to cannabis to keep it out of the hands of children, and profits out of the hands of criminals

The Department of Finance Canada has published a proposed excise duty framework for cannabis products. The proposed level of taxation is intended to keep prices low to eliminate the black market, and would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, and seeds and seedlings for home cultivation.

The federal government proposes that the combined rate of tax for cannabis flowering material contained in a final packaged product should not exceed $1.00 (60p) per gram, or 10% of the producer's sale price of that product, whichever is higher, with this tax divided equally between the province or territory and the federal government.

The proposed framework will impose an excise duty that is the higher of a flat rate (eg, an amount per gram) applied on the quantity of cannabis contained in a final product available for sale, or a percentage (i.e., ad valorem rate) of the federal licensee’s sale price of the product it has packaged.

The Canadian government says this approach is intended to provide flexibility in helping support its policy goals by establishing a minimum duty amount for cannabis products, while also accounting for changing market conditions and variances in product value and potency. The framework has also been designed to capture a wide variety of products to account for the expansion of available products for sale in the future (e.g., edibles).

Revenues raised from the taxation regime would be used to support investments in public education, enforcement, research and other activities integral to an effective system of legalisation and regulation of cannabis.

The federal framework is intended to be in place once legal cannabis for non-medical purposes becomes accessible for retail sale, no later than July 2018.

The deadline for comments on the proposals is December 7.

The Proposed Excise Duty Framework for Cannabis Products is here.

Report by Pat Sweet

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