Canadian tax plan announced for cannabis
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.
