The Canadian government has collected over $1 billion in cannabis taxes since legalization began in 2018

Since recreational cannabis use became legal in Canada in 2018, that country’s federal government has imposed a total tax on cannabis products of over CA$1 billion (US$740 million). Executives expect the government would ease the tax and excise regime it is imposing on the sector as employment and financial losses surge when the milestone is reached.

According to the Canada Revenue Agency (CRA), between fiscal years 2018-19 and 2020-21, the federal government collected approximately CA$862.3 million in levies on cannabis products, most of which was distributed among the provinces and territories.

Similar data for fiscal year 2021-22 has not yet been released by the CRA.

However, the most recent official accounts presenting government costs and revenues show that the federal government received CA$160.2 million in cannabis levy revenue this year, bringing the total levy since 2018 to at least CA$1.02 billion dollars brings.

Smash the $1 billion mark

Since the number of public bills for 2021/22 excludes, among other things, the levy collected by the federal government and distributed to the provinces and territories, the total levy is likely to be significantly higher since 2018.

For prior fiscal years, the CRA established the following overall cannabis tax:

514 million Canadian dollars in 2020–21.

256.7 million Canadian dollars in 2019–20.

91.6 million Canadian dollars in 2018–19.

The figures include additional taxes applicable only in some jurisdictions, as well as additional taxes set by the federal government and allocated to the provinces and territories.

As sales have increased from 2018, the federal government’s overall tax on cannabis items has increased.

The federal government’s own revenue from the cannabis tax is as follows:

For 2021-2022 160.2 million Canadian dollars.

108.9 million Canadian dollars in 2020–21.

2019-20 52 million Canadian dollars.

18.3 million Canadian dollars in 2018–19.

IRS identified the amount of the “additional” cannabis tax and an “adjustment” to that increased tax as CA$403.3 million of the CA$514 million made by the CRA for fiscal year 2020-21.

The CRA, in an email to MJBizDaily, explained the “additional” tax as a cannabis excise tax that the federal government wanted to separate with the territories and provinces from the sale of recreational marijuana in their respective areas.

In exchange for her sharing 75% of the money earned and keeping 25% for herself, the federal government agreed.

Canada’s excise tax on dried cannabis produced by producers is CA$1 per gram, or 10% of the price per gram, whichever is greater.

In some places there is a consumption tax in addition to the federal tax. These amounts are referred to by the CRA as “adjustment” to the increased cannabis tax.

According to the agency, any funds raised as part of this notional adjustment will be returned to the appropriate province or territory.

The distinction between the “extra” tax and the “adjustment” to the cannabis surcharge is not made in the CRA tables.

After accounting for provincial and federal taxes, sales of cannabis to governments in Canada generated an estimated CA$1.6 billion in fiscal year 2021-2022.

This income includes:

Provincial alcohol and marijuana regulators reported net income of CA$300 million.

“Total taxes” and other revenue streams brought in $1.3 billion.

What is included in the CAD$1.3 billion?

A $200 million federal excise tax.

From additional provincial or territory revenue streams, including provincial excise taxes, $600 million.

CA$500 million in retail sales taxes.

MAJORITY OF DUTY BY FLOWER

The bulk of the levy imposed by the federal government was on dried/fresh cannabis, broken down by product category.

Levies levied on dried or fresh cannabis accounted for 79.2% of the total for tax years 2018-21.

A total of 16.5% of the load consisted of cannabis extracts, including oil.

By the end of fiscal 2019-20, cannabis edibles were being rolled out nationwide, but until then, the tariff didn’t start increasing significantly.

From CA$1.2 million in 2019-20 to nearly CA$6.5 million in 2020-21, the total tax on edibles increased.

Tax levied on topical cannabis products totaled CA$973,000 in fiscal year 2020-21.

The CRA did not disclose the royalty paid on cannabis plants and seeds in the aforementioned year for “confidentiality reasons.”

Nevertheless, the amount did not exceed CA$ 436,000.

IMPACT OF HIGH CANNABIS TAXES ON CANADIAN INDUSTRY AND CONSUMERS

The Canadian government’s high cannabis taxes have been a significant source of revenue for the nation, but have also had a major impact on the cannabis market and cannabis users. Legal cannabis is often much more expensive than illegal cannabis due to high taxes, making it difficult for companies to compete with the black market. As a result, despite the fact that cannabis is now legal for recreational use, many Canadians continue to buy it from unreliable suppliers.

Some people have found it difficult to afford legal cannabis due to high taxes on cannabis products, which have also increased consumer prices. Because they cannot afford to buy legal cannabis at current costs, people who rely on cannabis for medical purposes are often forced to buy from illegal sources.

Many industry participants have called for a reduction in cannabis taxes, or at least a reorganization of the current tax structure, in response to these issues. Some have argued that a lower tax rate would make it easier for legitimate businesses to compete with the black market and ultimately make more money for the government. Others have recommended using cannabis tax dollars to fund education and harm reduction initiatives to combat the negative effects of drug use.

FINAL EFFECT

Since cannabis was legalized in Canada in 2018, the government has collected over CA$1 billion in taxes and tariffs, but the high taxes have made legal cannabis more expensive than the illegal market, impacting the sector and consumers. Due to the financial damage caused by the epidemic, the government may consider cutting the tax code.

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