Hon. Duncan Wilson: Senator Moreau, the cannabis industry’s current excise stamp requires each of the 13 provinces and territories to have a unique stamp applied to cannabis products. When these products are reallocated to different regions, these stamps must be manually removed and replaced, and the old stamp must be saved for the Canada Revenue Agency, or CRA. Removal, replacement and re-storage add labour and logistical costs, leading to lower margins and higher prices, which in turn serve to incentivize the illicit market.
Industry leaders have identified this excise stamp system as an internal trade barrier that costs farmers and manufacturers roughly $100 million per year.
These entrepreneurs are calling for a national excise stamp that would streamline production, reduce costs and improve efficiency. Earlier this week, Minister LeBlanc announced the upcoming release of the regulations for the Free Trade and Labour Mobility in Canada Act. Given this, coupled with the government’s focus on cutting red tape and removing barriers to internal trade, might we expect to see the shift to a national excise —
The Hon. the Speaker: Thank you, senator.
Hon. Pierre Moreau (Government Representative in the Senate): The government announced, as part of the 2024 Fall Economic Statement, its intent to explore a transition from cannabis excise duty stamps specific to each province and territory to a single national stamp. As you noted, this would make it easier for regulated cannabis producers to ignite new business opportunities in other provinces and territories.
It is important to note that the stamp is also used to track the destination of sales for revenue-sharing purposes. The federal government shares duty revenues with provinces and territories, with the provinces and territories receiving 25% and the federal government receiving 75%.
The government’s work in evaluating the feasibility of a single national cannabis excise stamp is ongoing, but, as you know, I cannot provide any further timeline on when this will be implemented.
Senator Wilson: Senator Moreau, implemented in 2018, the cannabis excise tax is valued at the greater of 10% of the product’s value or $1 per gram. Although it was assumed then that cannabis would sell for $10 per gram, the market has experienced wholesale prices closer to $3. This means that the flat-tax rate prevails, resulting in producers facing a tax rate as high as 30% rather than the intended 10%. As a result, we are driving traffic to illicit producers and undermining the viability of law-abiding businesses that operate within the established regulations.
Can you speak to whether the government has a plan to address this taxation issue?
Senator Moreau: I agree with the premises of your question, but, as you well know, it is not possible for me to speak to any future potential changes to cannabis excise taxes as I can’t provide you with any information concerning future decisions of the government regarding expenses or taxes. But as soon as those are announced, I would gladly communicate with you on these matters.