Licensed cannabis producers in Canada are facing a severe financial crisis due to skyrocketing unpaid federal excise taxes. In the most recent fiscal year, the outstanding tax debt owed by these struggling companies has more than tripled, reaching an alarming CAD 192.7 million ($141.2 million).
Federal tax debt is rapidly accumulating among licensed cannabis producers, with the number of companies owing excise debt rising from 68 in March 2020 to 213 in March 2023.
Tax Burden
Licensed cannabis producers are facing an overwhelming burden of high excise taxes, which extract up to 30% of their revenue. The original estimation of CA$10 per gram wholesale price is now far from reality, as reported by MJBizDaily. With current wholesale prices hovering around CA$2.75 per gram or less, the unexpectedly high excise tax based on outdated price projections has exacerbated the financial strain on producers already grappling with a market flooded by cannabis overproduction.
The number of licensed producers burdened by excise debt continues to rise at an alarming rate. As of March 2023, approximately 70% of the licensees are facing this dire situation, accumulating substantial tax debt.
1.5 Billion in Cannabis Taxes
In the previous fiscal year, federal and provincial governments collected over CAD 1.5 billion in cannabis-related revenue and taxes, accounting for 38% of the total earnings before private-sector profits.
Industry leaders and experts emphasize the urgent need for a recalibration of the tax policy to save the cannabis sector from its imminent collapse. The disparity between projected and actual wholesale prices has pushed businesses, especially small ones, to a critical breaking point.
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Photo: Michal Jarmoluk via Pixabay.
Canada’s licensed cannabis producers are struggling financially due to their unpaid federal excise tax, which has more than tripled in the most recent fiscal year, reaching an alarming amount of CAD 192.7 million ($141.2 million). The number of licensed cannabis producers with outstanding tax debt has risen from 68 in March 2020 to 213 in March 2023. These producers are facing a challenging tax burden, with up to 30% of their revenue going towards excise taxes. Licensed cannabis producers are overwhelmed, as the original estimation of CA$10 per gram wholesale price differs significantly from current wholesale prices hovering around CA$2.75 per gram or less. The increased excise taxes based on outdated price projections have exacerbated the financial strain on producers, who are already grappling with a market flooded by cannabis overproduction. As of March 2023, approximately 70% of the licensees are facing this dire situation, accumulating substantial tax debt. In the previous fiscal year, federal and provincial governments collected over CAD 1.5 billion in cannabis-related revenue and taxes, accounting for 38% of the total earnings before private-sector profits. The industry leaders and experts emphasize the urgent need for a recalibration of the tax policy, especially as the disparity between projected and actual wholesale prices has pushed businesses, especially small ones, to a critical breaking point.
