Canadian Cannabis Producers Are Financially Squeezed: Unpaid Marijuana Fees Grow 10X YoY To CA$914K

Has competition in the Canadian cannabis market finally reached its climax?

Some advocates would say so, considering that unpaid marijuana regulatory fees have grown ten times over the years, according to data from Health Canada, reported MJBizDaily.  

According to some industry officials, this could indicate a symptom of “squeezed producers” who are overburdened and therefore obliged to pick which bills to cover on time. 

The agency revealed that overdue fees on Dec. 31 amounted to CA$914,000 ($726,000) for the 2020-21 fiscal year. For fiscal 2019-2010, the unpaid fees were CA$72,000.

In the sum of CA$914,000, are annual regulatory fees in the amount of CA$723,000 that were deferred until March 2021, which means they were nine months late on Dec. 31. The fees were deferred to address the economic challenges imposed by the COVID-19 global pandemic.

Health Canada noted that in the previous years, there were no outstanding fees.

What’s interesting is that the total sum of unpaid fees makes for a small percentage of the revenue the government collected from marijuana businesses. For fiscal 2020-21, the revenue from marijuana fees reached CA$29.9 million, which is notably lower than projected due to the deferred annual fees.

In the previous year, paid fees amounted to CA$50.5 million compared to CA$72,000 of unpaid.

Are cannabis producers financially squeezed? 

 “I wish I could tell you that it was the beginning of an industry withholding of the fees pending improvement to the processing times and service standards at Health Canada,” said George Smitherman, president, and CEO of the Ontario-based Cannabis Council of Canada industry group. “I could only muster that it is a reflection on the very challenging times that producers are facing and may reflect a prioritization of paying (Canada Revenue Agency) excise fees.”

Deepak Anand, the founder of London-based cannabis company Materia Ventures, highlighted that handling cash flow at the moment is harder than ever for some Canadian cannabis producers.

“As a result, it is becoming fairly common practice for several standard as well as micro cultivators/processors having to resort to factoring of receivables against invoices from provincial boards to help fund their (operating expenses),” Anand said.

What Are Fees Covering For?  

Canada’s excise duty on dried cannabis flower is either CA$1 per gram or 10% of the price per gram, whichever is higher. There are also different excise duty rules for other cannabis products and their derivatives such as edibles, extracts, etc.

Some Canadian marijuana growers are urging the federal government to amend its cannabis excise tax regulations.

Health Canada is charging fees to reimburse the federal government’s costs for marijuana regulation, but according to the agency the fees don’t cover half of these costs. In 2019-20, Health Canada claimed its regulatory costs to be CA$110.2 million, but it gathered only CA$50.5 million in revenue from fees.

Photo: Courtesy of Andre Taissin on Unsplash