The federal government at long last has announced their plans to tax cannabis when it opens up the recreational market next July.
The plan includes both a fixed tax cost of $1.00 for sales up to $10 as well as a percentage of 10% for sales over 10$. If this is modelled after the excise taxes on alcohol and cigarettes in Canada then this will also be subject to 13% HST.
Before we look at the windfall for the government, let’s examine what this will mean for purchasers in New Brunswick based on the numbers supplied for their awarding of a no bid contract to Tweed and Organigram.
The contract in it’s first year is estimated to be about $40m for 4 million grams for Tweed. This works out to be about $10 a gram (we have no details on whether distribution costs are included). Add on the excise tax of $1 and HST and the cost jumps to $12.43 a gram(about $348 an oz) . Below is a quick table to show the price to consumer with the excise and HST taxes applied.
|
Price per gram
|
With excise tax
|
With HST
|
Price per oz
|
|
$5
|
$6
|
$6.78
|
$189.84
|
|
$6
|
$7
|
$7.91
|
$221.48
|
|
$7
|
$8
|
$9.04
|
$253.12
|
|
$8
|
$9
|
$10.17
|
$284.76
|
|
$9
|
$10
|
$11.30
|
$316.40
|
|
$10
|
$11
|
$12.43
|
$348.04
|
|
$11
|
$12.10
|
$13.67
|
$382.84
|
|
$12
|
$13.20
|
$14.92
|
$417.65
|
|
$13
|
$14.30
|
$16.16
|
$452.45
|
|
$14
|
$15.40
|
$17.40
|
$487.26
|
This table just reflects the current costs of cannabis flowers. Once we get to top market cannabis extracts the additive cost for consumers starts to jump.
|
Price per unit
|
With excise tax
|
With HST
|
|
$50
|
$55.00
|
$62.15
|
|
$60
|
$66.00
|
$74.58
|
|
$70
|
$77.00
|
$87.01
|
|
$80
|
$88.00
|
$99.44
|
|
$90
|
$99.00
|
$111.87
|
|
$100
|
$110.00
|
$124.30
|
Trudeau also announced that this excise tax would be split with the provinces. Based on a $10 per gram charge and the estimate of 600 metric tons needs to meet the initial demand, the tax windfall per province looks like the following;
|
Province
|
Percentage of population
|
Estimated Cannabis sales (gr)
|
Provincial Excise Taxes
|
Federal Excise Taxes + HST
|
|
Ontario
|
38.3%
|
229980000.00
|
$114,990,000.00
|
$129,938,700.00
|
|
Quebec
|
23.27%
|
139620000.00
|
$69,810,000.00
|
$78,885,300.00
|
|
British Columbia
|
13.25%
|
79500000.00
|
$39,750,000.00
|
$44,917,500.00
|
|
Alberta
|
11.59%
|
69540000.00
|
$34,770,000.00
|
$39,290,100.00
|
|
Manitoba
|
3.44%
|
20640000.00
|
$10,320,000.00
|
$11,661,600.00
|
|
Saskatchewan
|
3.13%
|
18780000.00
|
$9,390,000.00
|
$10,610,700.00
|
|
Nova Scotia
|
2.63%
|
15780000.00
|
$7,890,000.00
|
$8,915,700.00
|
|
New Brunswick
|
2.13%
|
12780000.00
|
$6,390,000.00
|
$7,220,700.00
|
|
Newfoundland
|
1.48%
|
8880000.00
|
$4,440,000.00
|
$5,017,200.00
|
|
PEI
|
.41%
|
2460000.00
|
$1,230,000.00
|
$1,389,900.00
|
|
Northwest Territories
|
.12%
|
720000.00
|
$360,000.00
|
$406,800.00
|
|
Nunavut
|
.10%
|
600000.00
|
$300,000.00
|
$339,000.00
|
|
Yukon
|
.10%
|
600000.00
|
$300,000.00
|
$339,000.00
|
|
$299,940,000.00
|
$338,932,200.00
|
While provinces like Ontario that have a windfall of new tax generation of over $110m. Provinces such as the Yukon will have to stretch to have their taxes of $300K to administer a program. Look to more news of the Feds having to send more money to some provinces to ensure that all the programs are running to the same standard.