Aidan Jaager
Saskatoon StarPhoenix
Local cannabis store operators say high provincial and federal taxes are making it difficult for industry businesses to succeed in the province.
Jim Southam, president of Prairie Cannabis in Saskatoon, said “the government are the only ones making money in the industry.
“If they don’t do something with the excise tax, I see this industry failing. If that happens, we’re all going back to the black market and legalization will just be something that we tried and failed. We’ll go back to how it was pre-October of 2018,” he added.
According to information recently shared in response to a House of Commons order paper question from Quebec MP Luc Berthold, Ottawa and the provinces raked in more than $5.4 billion in cannabis tax revenue since the drug was legalized for recreational use in October 2018.
In terms of per capita tax revenue, Alberta — at around $210 per person — easily surpassed its nearest rivals the Northwest Territories, which collected $135.80 per person. They are followed by the Yukon at $126.35, Saskatchewan at $121.55 and Newfoundland and Labrador at $113.65.
The federal government has collected $1.2 billion, with the remaining $4.2 billion going to provincial coffers. Ontario took in the greatest provincial share of revenue — $1.5 billion — with Alberta coming in second at just over $1 billion, despite having less than a third of Ontario’s population.
Saskatchewan’s excise tax on cannabis includes a provincial component, which is multiplied by an additional 6.45 per cent adjustment rate on top of the base provincial excise rate of 7.5 per cent. The provincial component is part of the combined federal-provincial excise duty.
Together with the federal component, this results in an effective excise tax of roughly $1.05 per gram, which is paid up-front by producers and is factored into the retail price.
Separately, there is a charge of five per cent GST and six per cent PST on cannabis sales to consumers.
The Saskatchewan government, in a statement, said provinces receive a portion of revenue generated from the federal Cannabis Excise Duty.
“The Government of Saskatchewan does not have the authority to change the federal Cannabis Excise Duty, nor are we seeking any changes from the federal government at this time.”
Southam has heard people estimate that the legal cannabis industry has about 75 per cent of overall sales, but he believes it’s closer to 50 per cent because of the black market.
“With the excise tax and the provincial tax being upwards of 50 per cent of the product’s cost in some instances, it’s difficult,” he said.
“If we want to stay in business, we have to set the profit margin at what we need it to be for the retail stores. They base the excise tax at a dollar a gram at the beginning, and we’re paying much less than that. They are assuming that the cost of cannabis was going to be $10 a gram, and that’s not what it is today.”
Southam added that the “government needs to make it like GST or PST, where it’s a percentage … if I’m paying 10 bucks, it should be 10 per cent.”
“We’re still not making money hand-over-fist. Everybody thinks we’re making millions, and I’m making less money. I’m paying myself less money now than I was in 2018.”
Dylan Lawrence, regional manager of The Pot Shack in Saskatoon, said Saskatchewan’s government is to blame.
“It has always seemed as a province that our political powers didn’t ever embrace it,” Lawrence said.
“They’re happy to take the money if they have to, but they didn’t embrace the actual implementation of legalization.”
Lawrence said he is referring to the government not enforcing limits on store ownership, pushing smaller independent retailers out of the market. He added that they did not build a well-regulated system in this regard.
Lawrence alluded to there being no monopoly rules in place in the industry across the province. He worries that bigger companies “are going to buy every single independent-owned business in this province until they are the only option and they control the distribution. So on top of being the only retailers, they will be the people that get distribution through, and will control the entirety of the pricing of product.
“We will either be bought by them because we will be forced and unable to compete, or we will end up having to be priced out of the market.
“Right now we’re watching a lot of the major chains drop pricing to a point that we need to drop ours to stay competitive. And in smaller retail locations, it just doesn’t work. Eventually it ends up being a nail in the coffin.”
The province acknowledged that “unlike other provinces, both the wholesaling and retailing of cannabis in Saskatchewan is fully conducted by the private sector. This approach has provided a number of advantages.”
SLGA does not restrict the number of cannabis retailers and wholesalers, which the province says “has allowed private businesses ranging from small businesses, independent chains and large corporations to operate in the province as retailers and wholesalers. In most other provinces, government-owned wholesalers and/or retailers control the supply chain and have the ability to take substantial profit from cannabis.
“Saskatchewan’s private retail and distribution framework enables permitted cannabis wholesalers and retailers and registered federal cannabis licensees to supply the Saskatchewan market with no additional provincial fees and less regulatory red tape.”
