Calls have been made by the British Columbia and Ontario Chambers of Commerce to the Canadian government in favour of reassessing the federal tax on dried cannabis flower amid plummeting prices.
In a recent article published by MJBiz, it’s stated that the BC Chamber wants the provincial government to work with federal authorities to revamp the national excise tax for cannabis producers. This will allow cultivators to stay competitive with the illegal market by keeping operating costs down.
Pricing data on the Canadian Cannabis Exchange (CCX), shows flower prices in the fourth quarter were on average 36% lower than in the first quarter of 2021. Throughout the year a strong increase in supply of high quality and high THC product drove pricing levels down across the board. The overall value of THC by percent fell from $0.13/THC in April 2021 to $0.08/THC at the end of 2021. Flower with 25+% THC experienced the most pricing volatility in 2021 with prices reaching over $4.00 per gram in June and transacting as low as $2.00 per gram in September. These pricing fluctuations impact growers bottom line as Canada’s current excise duty on dried cannabis flower is either $1 CAD/gram or 10% of the value of the gram, whichever is greater.
Chart 1: Flower Price Per THC 2021 ($/THC)
Source: Canadian Cannabis Exchange
Groups representing craft licensed producers and micro producers, such as Stand for Craft, have been advocating for excise tax reform. Stand for Craft is proposing a percentage-base excise tax based on “difference tax tiers” for micro cultivators, craft scale standard growers, small to medium enterprises and large cultivators.
Reconsidering the current excise tax would allow smaller producers to remain in competition with larger operations. In 2021, 4 major players (Aurora, Canopy, Tilray, and Hexo) lost market share as small to midsize operations expanded their footprints. The ability for smaller operations to drive product innovation, pivot faster and implement cost efficient processes continues to bring on incremental supply and drive prices lower.
