Health Canada will charge licensed cannabis producers based on real revenue

Health Canada has decided to target real revenue rather than forecast revenue in determining the amount in annual fees that licensed producers will have to pay the government.

The department said in a press release Friday that it will “use previous year’s revenue to calculate the fee rather than forecasted revenue”. LPs will still need to pay an annual regulatory fee of 2.3 percent of their revenue so the Canadian government can cover the costs associated with regulating the new, legal market. Health Canada also said it promises to ensure “it recovers no more than the regulatory costs.” In 2017, the organization estimated the cost to be $546-million over the next five years, according to the Globe and Mail.

Allan Rewak, Executive Director of the Cannabis Council of Canada, a group representing large LPs, said that the decision to calculate annual fees based on actual revenue is positive. 

“We still felt it would have been a better choice for Canada to wait on the annual regulatory fee until at least the first year roll-out had been conducted. That being said… I think this will result in something we can work with,” said Mr. Rewak.

“It will allow us to better understand and adapt to the impact of this fee. Personally I suspect we’re going to collect a lot more money than is required, based on revenues,” he added.

It’s estimated that Health Canada will recover between 14 percent and 33 percent of its costs in the first “partial year of fee revenues starting after the coming into force of the Cannabis Act.” It’s expected that the costs recovered will increase year over year as the industry matures. The department expects to fully recover their costs after three years.

Fred O’Riordan, national leader of tax policy at EY Canada said that while the decision to tax based on real revenue is a “move in the right direction”, he still has concerns about the approach to cost recovery. He said that the 2.3 percent fee in additional to federal excise taxes and provincial taxes will force producers to drive up their prices which will affect the end consumer.

“Contraband cannabis will prosper to the extent that the legal marketed prices are too high,” said O’Riordan.

Other fees for producers include:

  • $3,277 per application for standard cultivation, processing and sale licenses

  • $1,638 per application for standard micro-cultivation, micro-processing and nursery licenses

  • $1,654 per security clearance request

  • $610 per import/export permit request

Some LPs will be exempt from certain regulatory fees such as companies with a license for research, hemp production or analytical testing. Producers growing exclusively for the medical industry are also exempt from the annual fee. 

Original Article by 420intel

Victor MadrilComment